Pre-Feasibility Study

 

 

 

 

 

 

BERKELEY RESOURCES LIMITED 

AIM RELEASE  |  26 SEPTEMBER 2013  |  ASX/AIM:BKY

 

POSITIVE PRE-FEASIBILITY STUDY CONFIRMS POTENTIAL OF

SALAMANCA URANIUM PROJECT

Highlights:

·     Steady state annual production of 3.3 million pounds U₃O₈ over a 7 year period, with average annual production of 2.7 million pounds U₃O₈ over an initial 11 year life of mine;

·     Pre-Feasibility Study considered a base case scenario, with strong potential to increase the production profile and/or mine life;

·     Average operating costs (C1 cash costs) of US$24.60 per pound of U₃O₈ over the life of mine; and

·     Upfront capital cost of US$95.1 million to deliver initial production. A further US$74.4 million, incurred in the second year of production, to achieve steady state operation.

Berkeley Resources Limited ('Berkeley' or 'the Company') is pleased to announce that the Pre-Feasibility Study ('PFS' or the 'Study') for the Company's flagship Salamanca Project (the 'Project') in Spain has confirmed the technical and economic viability of the Project.

 

The Directors believe that the successful completion of the Salamanca Project PFS has clearly demonstrated its potential to support a significant scale, long life, low cost uranium operation. Furthermore, recent results from the Gambuta and Zona 7 deposits, and the exploration potential in proximity to planned operations, highlight the potential to increase the mine life and/or forecast production levels of this base case scenario. Having accomplished this significant milestone, the Company will now focus on advancing the Project through the DFS phase, moving it closer to fulfilling its strategic objective of becoming a uranium producer in the near to medium term.

 

Using only the current Mineral Resource Estimates for Retortillo and Alameda, which total 34.5 million pounds U₃O₈ (36.9 million tonnes at 424 ppm; 200 ppm U₃O₈ cut-off grade), as a base case scenario, the Project can support an average annual production of 3.3 million pounds of U₃O₈ during the seven years of steady state operation and 2.7 million pounds of U₃O₈ over a minimum eleven year mine life. There is strong potential to increase the production profile and/or mine life through the exploitation of additional resources held by the Company (totalling 27.1 million pounds U₃O₈) and with ongoing exploration work.

 

The PFS is based on open pit mining, heap leaching using on-off leach pads, a centralised process plant at Retortillo, and a remote ion exchange operation at Alameda, with loaded resin trucked to the centralised plant for final extraction and purification. The open pits are shallow (maximum depth of 135 metres) with low strip ratios (average 1:2.1 ore to waste for the Project over the life of mine). During steady state operation the annual ore processing rate is 5.5 million tonnes. Operating costs (C1 cash costs) average US$24.60 per pound U₃O₈ over the life of mine.

 

 

The initial capital cost (nominally ± 20% accuracy) for the Project is estimated at US$95.1 million. This cost is inclusive of all mine, processing, infrastructure and indirect costs required to develop and commence production at Retortillo. A further US$74.4 million of capital, incurred in the second year of production, is required to develop Alameda and achieve steady state operation. The Project's capital cost reflects the excellent existing infrastructure, use of heap leaching as the preferred processing route, and the favoured mining contractor scenario (no mining fleet capital expenditure).

 

A number of opportunities to further enhance the Project economics through capital and operating cost reductions were identified in the PFS. The Company will now undertake a review process, with a view to assessing these opportunities and defining key work programs to be incorporated into the final scope of the Definitive Feasibility Study ('DFS'). The DFS is anticipated to be awarded by the end of 2013 and completed by the end of 2014.

 

 

 

                        Enquiries:                  Robert Behets                                  

                                                            Berkeley Resources            

+61 8 9322 6322

            Martin Eales

RBC Capital Markets
            +44 20 7029 7881 

 

 

 

Introduction

Berkeley is focused on the development of its wholly owned flagship Salamanca Project in western Spain. The Project includes the Retortillo, Alameda and Gambuta deposits as well as a number of Satellite Deposits. This announcement outlines the positive results from a PFS on the integrated development of Retortillo and Alameda.

 

The PFS was managed by SENET and was completed by a number of industry recognised specialist consultants including SRK Consulting for mine design, Knight Piésold for heap leach design, Duro Felguera for project cost estimates and URS for environmental management.

 

The key considerations for the PFS were preferred mining method and mining schedule, preferred processing route, scale, throughput rate, project life, as well as development of the associated infrastructure taking due cognisance of community and environmental impacts.

 

The basic approach to the development of Retortillo and Alameda contemplated in the PFS includes:

·     Mining to commence at Retortillo. Alameda integrated into production in Year 3;

·     Open pit mining at both sites (transfer mining to facilitate continuous rehabilitation);

·     Heap leaching using on-off leach pads at both sites;

·     Centralised solvent extraction ('SX') and ammonium diuranate ('ADU') precipitation plant, located at Retortillo; and

·     Remote ion exchange ('IX') operation at Alameda, with loaded resin trucked to the centralised plant for final extraction and purification.

 

Key parameters used in the PFS include:

·     Ore Processing Rate              5,500,000 tonnes per annum (steady state)

·     Mining Cut-off Grades             105 ppm U₃O₈ for Retortillo and 90 ppm U₃O₈ for Alameda

·     Metallurgical Recovery            85%

·     Uranium Price                         US$65 per pound U₃O₈

·     Exchange Rate                       US$/€ 1.28

 

The PFS has been based solely on the Mineral Resource Estimates ('MRE's') for Retortillo and Alameda and the minimum Project life of eleven years (including seven years of steady state operation) is considered a base case scenario. Given the significant additional Mineral Resources and exploration upside associated with Gambuta, Zona 7 and other Satellite Deposits, significant potential exists to increase the production profile and/or project life.

 

Geology and Mineral Resources

Retortillo and Alameda are both vein type uranium deposits hosted in meta-sedimentary sequences adjacent to granitic intrusives.

 

At Retortillo, the mineralised envelope is generally sub-horizontal and the mineralisation is contained within a stockwork of veins. The uranium mineralisation appears to be associated with the presence of sulphides within the partially weathered zone and the base of mineralisation is associated with the base of partial weathering which locally deepens along structures.

 

At Alameda, the uranium mineralisation occurs in a complex network of moderately to steeply dipping brittle structures (veins, faults, fractures and along bedding contacts) as a result of a low temperature hydrothermal event. The mineralised zones commonly have sharp boundaries, separating mineralised structures from poorly mineralised host rock.

 

The PFS was based solely on the MRE's for Retortillo and Alameda (Table 1), prepared by Berkeley and reported in accordance with the JORC Code (2004). 

Table 1 - Summary of MRE's used as the basis of the PFS

Retortillo and Alameda Mineral Resource Estimates - September 2013 Reported at a lower cut-off grade of 200 ppm U3O8
	Category	Tonnage (million tonnes)	Grade (U3O8 ppm)	Contained U3O8 (million pounds)
Retortillo	Indicated	14.4	378	12.0
	Inferred	1.8	359	1.4
	Sub Total	16.2	376	13.4
Alameda	Indicated	20.0	455	20.1
	Inferred	0.7	657	1.0
	Sub Total	20.7	462	21.1
Combined	Indicated	34.4	423	32.1
	Inferred	2.5	443	2.4
	Total	36.9	424	34.5

 

These MRE's  are based on a combination of chemical assays and e-grades (down-hole gamma logging data presented as "equivalent" U₃O₈ grades or eU₃O₈) from historical drilling, supplemented by additional diamond ('DD') and reverse circulation ('RC') drilling by Berkeley with both chemical assays and e-grades. They were developed by a team of in-house and consulting geologists following a rigorous program to verify historical data and create a validated database containing all historical and recent data.

 

The Alameda MRE is unchanged from that reported in July 2012 and is based on data from approximately 41,000 metres of historical DD drilling and 11,000 metres of DD and RC drilling undertaken by Berkeley.

 

The Retortillo MRE has been updated to incorporate the results of a recent RC infill drilling program which comprised 67 RC drill holes for 4,382 metres and is reported herein (Table 1). The Retortillo MRE was previously reported in July 2012. A comparison between the September 2013 MRE and July 2012 MRE highlights the following:

·     Total tonnes have increased by 7% (16.2 million tonnes vs. 15.2 million tonnes);

·     Average grade has decreased by 2% (376 ppm U₃O₈ vs. 383 ppm U₃O₈);

·     Total contained uranium has increased by 5% (13.4 million pounds U₃O₈ vs. 12.8 million pounds U₃O₈); and

·     Indicated Resources have increased from 61% to 90% of total MRE.

 

These changes are largely attributable to the inclusion of the results of the recent infill drilling, which were mostly in line with expectations based on the previous July 2012 resource model, and they also confirmed that the mineralisation extends a further 200 metres to the northwest beyond the previous resource boundary. A summary of the information used in the September 2013 resource estimation is as follows.

 

Drilling of the Retortillo deposit has occurred in two phases comprising a total of 1,019 drill holes for 68,727 metres. The first phase relates to historical drilling from the 1960's to 1980's (30% of total drilling) and second phase was conducted by Berkeley from 2007 until present (70% of total drilling). The drilling has been a combination of DD, RC and open hole (OH) drilling, comprising 43%, 50% and 7% of total drilling respectively. The drill hole spacing for the majority of the resource is 50 metres x 50 metres, with some areas of infill drilling to 35 metres x 35 metres. DD core recoveries typically exceed 90%. Drill hole locations from Berkeley drilling have been surveyed using differential GPS and were also surveyed using a Geovista downhole deviation probe. Historic drill holes were not surveyed but verification of drill holes that could be located has shown that there were no significant errors.

 

Sampling of diamond core was completed using 0.2, 0.25 or 1 metre sample lengths. For the historic DD, whole core samples were used while for the Berkeley drilling core was cut to achieve either half or quarter core samples. RC drill samples were collected using one metre intervals and these samples were split to achieve 0.7-1.0 kilogram samples which were sent for analysis.  Splitting employed either a riffle splitter or a cone and quarter method. Field tests of the two methods found that both produce representative samples. The historic OH drilling was not sampled and relied on downhole gamma logging to define the mineralised zones.

 

All Berkeley drill holes were down-hole gamma logged and e-grades calculated from down-hole gamma emissions recorded with standard gamma probes. The gamma response was converted to an estimated uranium grade by correcting for radon, hole diameter, and air/water, and a deconvolution filter was applied to reflect the nature of mineralisation. For the resource estimate, e-grade data is only used where there were no assay data.

 

The sample preparation of all samples involved oven drying and crushing to achieve a grind size of 85% passing 75μm. Berkeley samples were analysed for uranium by either delayed neutron counting ('DNC') or pressed powder x-ray fluorescence ('XRF') methods. Historic samples were analysed for uranium by XRF, atomic absorption spectrometry ('AAS') or fluorometric methods. Berkeley sample batches were prepared with standards and blanks inserted at a frequency of between 15 and 20% before dispatch to the laboratory. Field duplicates were also inserted at a frequency of 10%. There is no data available regarding quality assurance and quality control ('QAQC') from the historic drilling, but recent drilling of twinned holes have shown good correlation of mineralised intervals.

 

The geological interpretation was undertaken on 25 metre spaced sections with wireframes interpreted around the mineralised intercepts taking into account geology and structure where possible. These sectional interpretations were joined to create a series of 3D mineralised wireframes (domains) that showed continuity of grade along and across strike.

 

Basic statistics and variogram modelling was completed using one metre sample composites within each domain. As most sample populations had significant positive skewness, grade top cuts were applied. The block model was constructed using a  parent cell size of 10 metres (X) x 10 metres (Y) x 3 metres (Z) with cells being permitted to split once in any direction where bounding surfaces of the mineralised wireframes were intersected. The uranium grade was estimated into the parent cells using ordinary kriging. Over 2,300 density determinations were completed on diamond drill core and average densities, based on the amount of weathering, were assigned to the resource blocks. 

 

Validation of the models included visual inspection of the grade distribution compared to the drill hole data, comparison of block model and drill hole statistics and creation and assessment of swath plots. Overall the grade estimate showed a good representation of the drill hole data for the resource.

 

Classification of the MRE has been completed based on the guidelines specified in the JORC Code (2004 Edition). The MRE was classified with consideration of the following criteria:

·     Quality and reliability of raw data (sampling, assaying, surveying);

·     Confidence in the geological interpretation;

·     Number, spacing and orientation of intercepts through mineralised zones;

·     Knowledge of grade continuities gained from observations and geostatistical analyses; and

·     The potential prospect for eventual economic extraction.

 

A key consideration in the resource classification is the understanding of the structural controls on the mineralisation at a local scale. Recent infill drilling has resulted in improved confidence in that most drill results supported the previous resource model predictions. For the Retortillo deposit, where the drill spacing is 50 metres x 50 metres or less the resource has been classified into the Indicated Resource category. Small areas, where the drill spacing is greater than 50 metres x 50 metres remain classified in the Inferred Resource category.

 

Further technical details on the Retortillo MRE are included in Appendix 1.

 

Whilst the Retortillo and Alameda MRE's are reported at a 200 ppm U₃O₈ lower cut-off grade, the grade tonnage curves highlight the significant impact that the cut-off grade has on the resource estimate. At a 100 ppm U₃O₈ cut-off grade, which approximates the mining cut-off grade derived from the pit optimisations undertaken in the Study, the resource estimates for Retortillo and Alameda total 19.4 million pounds and 25.4 million pounds contained U₃O₈ respectively. This represents increases of 45% and 20% respectively in contained uranium, compared with the MRE at the 200 ppm lower cut-off grade.

 

Although the Study has been based solely on the Retortillo and Alameda MRE's, the Company has a 100% interest in additional Inferred Resources totalling 27.1 million pounds of contained U₃O₈ (28.5 million tonnes averaging 431 ppm U₃O₈ at a 200 ppm U₃O₈ cut-off grade, refer ASX June 2012 Quarterly Report) at Gambuta, Zona 7 and other Satellite Deposits, which are in close proximity to Retortillo and Alameda and have the potential to be integrated into later phases of production. These additional resources have not been considered in the PFS and their inclusion in subsequent studies, together with the significant exploration upside as recently demonstrated at Zona 7, has the potential to increase the mine life and/or production scale of the Project.

 

Mining

The mining of ore and waste is a conventional open pit operation. Diesel-powered truck and shovel operations, in combination with an effective drill and blast plan have been considered for both deposits.

 

As part of the Study, a series of Whittle optimisations were completed on the Retortillo and Alameda July 2012 MRE's. Materials classified in the Indicated and Inferred categories for Retortillo and Indicated category for Alameda were used in the optimisation process. A subsequent infill drilling program at Retortillo resulted in that portion of the Inferred Resource in the July 2012 MRE which fell within the optimised pit outline being upgraded to the Indicated category in the revised September 2013 MRE. Given that there was no material change to the revised September 2013 MRE, other than the upgraded classification, the initial optimised pit based on the July 2012 MRE was used for the Retortillo pit design and mine scheduling.

 

Inputs for the Whittle optimisation process included: overall pit wall slope angles of 35-45 degrees for Retortillo and 30-55degreesfor Alameda; 85% metallurgical recovery for both Retortillo and Alameda; US$65 per pound U₃O₈; and an 8% discount rate.

 

The economic cut-off grade used to determine the mineable ore within the optimum pit shell to be delivered to run of mine ('ROM') pad was developed using the Whittle optimisation method, resulting in economic cut-off grades of 105 ppm U₃O₈ for Retortillo and 90 ppm U₃O₈ for Alameda.

 

Practical pit designs, waste dump designs and life of mine ('LOM') mining schedules were then completed to determine the optimal long term mine plan.

 

The mining schedule extends over 11 years with initial mining at Retortillo. The seven year period of steady state operation begins in Year 3, when mining commences at Alameda.

 

An average of 5.5 million tonnes per annum of combined ore production is scheduled during steady state operation (Retortillo - 2.2 million tonnes per annum; Alameda - 3.3 million tonnes per annum). At its peak, the mining schedule contemplates the movement of a combined 18.1 million tonnes per annum (both waste and ore). The open pits are shallow with the maximum depths being 90 metres at Retortillo and 135 metres at Alameda. Strip ratios for the Project are low with the average LOM strip ratio being 1:2.1 ore to waste (Retortillo 1:2.6; Alameda 1:1.8). Over the LOM, a total of 20.0 million tonnes at an average grade of 306 ppm U₃O₈ and 29.9 million tonnes at an average grade of 322 ppm U₃O₈ are mined at Retortillo and Alameda respectively.

 

Both owner operator and contractor mining scenarios were evaluated in the PFS with contractor mining being selected as the preferred option. The contractor will be responsible for mining fleet and mine support equipment supply and maintenance, site preparation (including removal of vegetation), haul road construction, excavation, haulage of ore to the ROM pad and waste to the designated waste dump, and oversize rock breakage.

 

The mining operations are based on the use of hydraulic excavators and a fleet of haul trucks engaged in conventional open pit mining techniques. Blast hole drilling will be carried out in fresh rock using diesel powered top-hammer rock drills, whilst the Tertiary cover and weathered materials will be loaded without blasting (free digging) or may be in need of light blasting in certain areas. Typical mining bench heights of six metres will be employed at both deposits. The excavators load the blasted/broken material into the trucks, with ore being hauled to the ROM pad and waste being hauled to the designated local waste dump. Haul roads will be built as required to provide access into new mine areas and their design will include a minimum 25 metre width, including berms and drainage areas.

 

The mining method will be 'transfer mining' which allows the open pits to be continuously backfilled whilst, minimising waste dump volumes and waste rehandling. It also facilitates continuous rehabilitation to minimise environmental impact.

 

A detailed review of the mining and backfilling schedules for Retortillo and Alameda was undertaken in the PFS. As a result, the preferred direction and sequencing of mining has been modified at both sites to ensure that mined out voids of sufficient size are available for early backfilling (approximately 19 months and 15.5 months after commencement of mining at Retortillo and Alameda respectively, including the time required to isolate and line the mined out area), thereby minimising materials handling, temporary storage and rehandling.

 

 

Processing

Extensive metallurgical testwork has previously been carried out on an approximately 5 tonne representative sample of the Alameda deposit at the SGS laboratories in Perth (including tank leach and heap leach scenarios) and on a 5.5 tonne bulk sample, representative of the Retortillo deposit, at Mintek's mineral processing facility in Johannesburg (heap leach scenario).

 

Additional metallurgical testwork programs were conducted at Mintek and the Australian Nuclear Science and Technology Organisation ('ANSTO') facilities in Sydney as part of the PFS. The testwork program at Mintek was aimed at confirming the heap leach recovery for each phase of the respective mine schedules and testing ore variability with respect to geo-mechanical behaviour at both Retortillo and Alameda, as well as the determine the optimal heap leach feed size for Alameda.  The ANSTO testwork program was designed to facilitate the selection of the optimal backend of the process with the performance of direct SX and ADU precipitation being compared with that of IX and UO₄ precipitation. For further details on the PFS metallurgical testwork programs refer to the Company's ASX June 2013 Quarterly Report.

 

The results of this comprehensive metallurgical testwork have been used to select the preferred process route and design the flowsheet.

 

The process flowsheet comprises crushing, screening, agglomeration, stacking and heap leaching using on-off leach pads, followed by uranium recovery and purification by SX, ADU precipitation and calcination at a centralised plant, located at Retortillo. Pregnant liquor solution ('PLS') from the heap leach process at Alameda will be passed through a IX adsorption columns, with the loaded resin trucked to the centralised plant for final extraction and purification.

 

A heap leach versus tank leach trade-off study was completed, with heap leach technology being selected as the preferred leaching option due to the high efficiency shown during testwork. Testwork indicates high recoveries and good leach kinetics achieved at relatively coarse crush sizes of 40 mm for Retortillo and 12 mm for Alameda, significantly lower capital and operating costs, and important environmental benefits, including backfill of spent ore from the on-off heap leach pads ('ripios') into the mined pits, thus removing the requirement for a tailings storage facility. 

 

Two stage crushing of ROM ore will be undertaken at Retortillo (target product size of 40 mm), while three stage crushing is required at Alameda to deliver the finer product (12 mm) required for optimum uranium recovery. Primary jaw crushers will be followed by cone crushers for the secondary and tertiary stages.

 

Crushed ore will be agglomerated before stacking by direct feed into a conventional drum where spray bars will dose the ore with raffinate and sulphuric acid. No polymer addition is required for effective agglomeration. The agglomerates are conveyed overland to the heap leach pad and then stacked with radial stackers.

 

The heap leach comprises an on-off pad subdivided into cells to define areas for stacking, leaching, rinsing/draining and reclaiming. This facility is complete with ponds for makeup water, barren, immediate and pregnant leach solutions, storm water and all associated pumping and reagent storage facilities. The pad design includes a triple insulation system including two high density polyethylene ('HDPE') sheets and a clay layer.

 

The agglomerated material is stacked in 6 metre lifts and irrigated with diluted sulphuric acid solution (3 g/l) using drip emitters at a maximum rate of 6 litres/hour/metre². Testwork indicates a commercial leach cycle of 140 days. At Retortillo, the heap leach pad will measure 832 metres long by 260 metres wide at its base and the design comprises 13 cells in the first lift and 10 cells in the second lift resulting in a total capacity of 3.3 million tonnes. The Alameda heap leach pad will measure 475 metres long by 624 metres wide at its base and the design comprises 12 cells in the first lift and 10 cells in the second lift resulting in a total capacity of 5 million tonnes.

 

The ripios will be removed from the heap leach pad and backfilled into isolated and lined (clay layer and HDPE liner) areas within the mined pits on a continuous basis once mining has advanced sufficiently to accommodate this (approximately 19 months and 15.5 months after commencement of mining at Retortillo and Alameda respectively).

 

Acid consumption for the heap leach at both sites is 18 kg/t, inclusive of the addition of approximately 8 kg/t to 10 kg/t of acid in the agglomeration process. An opportunity to improve acid consumption by optimising the pH in which uranium can be dissolved (minimising the dissolution of other elements, principally iron) will be evaluated in the next phase of testwork. An external chemical oxidant is not required.

 

At Retortillo, the heap leach PLS will contain approximately 250-300 mg/l of U₃O₈ and feed directly into the SX facility. The Alameda heap leach PLS will be loaded onto resin in an IX adsorption column and the loaded resin transported a distance of approximately 50 kilometres by road to the centralised plant at Retortillo. The resin trucking operation will be undertaken by an authorised contractor with a fleet of two trucks making six return trips per day in total on a five day per week basis.

 

Once the resin has been stripped, the eluate containing uranium will be combined with the Retortillo PLS and fed into the SX plant for further processing. The SX facility will be designed with four extraction steps, two scrub steps and four stages of stripping to produce a raffinate of <5mg/l U₃O₈. Regenerated resin will be returned to Alameda for re-use.

 

The concentrated uranium solution from the SX plant is treated to precipitate the uranium using anhydrous ammonia. This solution is heated to a temperature of 30-40 degrees and ammonia is injected into the solution, raising the pH to around 7 and precipitating the uranium as ADU. The ADU slurry from the precipitation is pumped into a thickener for dewatering and the underflow dewatered further with centrifuges. The centrifuge cake is finally calcined at a temperature of 730 degrees to produce U₃O₈ which is drummed and prepared for shipping. 

 

Analysis of the PLS during the testwork programs indicates that there are no impurities at levels that could adversely impact the quality of the yellowcake to be produced.

 

Annual production averages 3.3 million pounds of U₃O₈ during a minimum of seven years of steady state operation, and 2.7 million pounds of U₃O₈ over the entire eleven year mine life.

 

Infrastructure

The Project is favourably located with respect to existing infrastructure. 

 

Both Retortillo and Alameda are readily accessible from the existing public road network, with only a 4.1 kilometre road deviation being required at Retortillo and the upgrade (widening and tarring) of 6.4 kilometres of an existing road necessary at Alameda.

 

The total power requirements for the Project are low at an estimated 3.7 megawatts ('MW') of consumed power at Retortillo and 3.2 MW at Alameda. It will be supplied from the nearby Spanish National Distribution Grid at a cost of US$0.10 per kilowatt hour, excluding capital, with connection requiring construction of a 22 kilometre 45 kilovolt ('kV') powerline at Retortillo and a 13 kilometre 45 kV powerline at Alameda. Installed power will be 5.8 MW at Retortillo and 5.4 MW at Alameda.

 

Water will be available from adjacent water courses and on-site sources such as pit dewatering bore holes and collection systems designed to capture rain and surface run-off water during the wet season. In general, the water balance at both sites changes from being negative during the initial years of production to positive for the remainder of the LOM when discharge will be required to accommodate all water sources. Contact water (process and mine water requiring pre-discharge treatment) will be neutralised in Water Treatment Plants at Retortillo and Alameda prior to any required discharge.

 

Given the Project's proximity to the city of Salamanca (70 km to the northeast of Retortillo) and local towns and villages, on-site accommodation facilities are not required. An on-site sulphuric acid plant is also not required for the Project as sulphuric acid is readily available from two in-country sources at a cost of US$124 per tonne delivered to site.

 

Capital Costs

The initial capital cost for the mine, processing facilities and associated infrastructure for Retortillo is estimated at US$95.1 million. This cost is inclusive of all infrastructure and indirect costs required to develop and commence production at Retortillo.

 

The capital cost for the mine, processing facilities and associated infrastructure for Alameda is estimated at US$74.4 million. This cost, which will be incurred in the second year of production, includes all infrastructure and indirect costs required for the Project to achieve a steady state production profile averaging 3.3 million pounds of U₃O₈ per annum.

 

The indirect costs include the first fill of reagents, Engineering, Procurement and Construction Management ('ECPM') costs, Preliminary and General ('P&G') costs and a 15% contingency. No allowance has been made for the acquisition of mining fleet (included in operating costs), as mining will be outsourced to a specialist contractor.

 

Working capital, amounting to US$23.8 million, is required to support eight months of operation after start-up at Retortillo and has been included in the Year 1 operating cost estimate.

 

The engineering studies supporting the capital cost estimates for the Project, allow for a level of accuracy of nominally +/- 20%. A summary of major capital costs is shown in Tables 2 and 3.