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Updated Feasibility Study identifies lower costs and increased financial returns

Strong results pave the way for Boss to progress offtake discussions and project funding, putting Honeymoon on track to be Australia’s next uranium producer
Highlights
  • Enhanced Feasibility Study incorporates planned changes to Honeymoon’s processing plant to lower costs and increase financial returns
  • Nameplate production capacity rises 22.5% to 2.45Mlb of U3O8
  • All-In Costs fall 11% to US$31.86/lb; All-In-Sustaining Costs fall 16% to US$25.62/lb; with Cash Costs falling 21% to US18.46/lb
  • Capital cost of expanding production estimated to be US$80m – utilising Ion Exchange as a replacement of the existing Solvent Extraction plant
  • Boss retains the option of feeding its strategic 1.25Mlb U3O8 inventory into its contract portfolio post commissioning of Honeymoon; This inventory has a value of US$75m based on EFS pricing but is not included in these EFS results
  • Honeymoon is fully permitted for production, storage and export of U3O8
  • EFS is based on only 36Mlbs of the total JORC Resource of 71.6Mlbs, highlighting scope for significant growth
“This study demonstrates that Boss is perfectly placed to capitalise on a strengthening uranium market with an existing plant and mine in a tier-one location with low costs and strong financial returns.” – Boss MD Duncan Craib

Boss Energy Limited (ASX: BOE ; OTC: BQSSF) announced on 21 June 2021 an Enhanced Feasibility Study (EFS) on its 100 per cent-owned Honeymoon Uranium Project in South Australia which reinforced the technical and financial robustness of the Project.

The EFS was based on revised capital and operating estimates, revised wellfield design plan and revised economic assumptions reflecting continued improvement in the outlook for uranium supply-demand fundamentals. Specifically, the capital cost captures savings made in relation to the improved elution circuit and incorporates the upfront inclusion of the NIMCIX columns that drive operating cost efficiency.

The results have further reinforced the Project’s exceptional financial and technical merits, delivering significantly enhanced financial returns, and was completed to an accuracy of -10/+15%. This is the second high confidence study completed on Honeymoon in the past 18 months.

Based on its JORC Resource at the Honeymoon Restart Area (HRA) of 36Mlbs of U3O8, Honeymoon has a Life of Mine (LOM) of plus-10 years at a forecast production rate of 2.45Mlb/annum. There is a further 35.6Mlbs in JORC Resources outside the HRA and significant exploration potential.

Importantly, the EFS found that the proposed changes to Honeymoon’s processing method would cut all-in-sustaining costs (AISC) by 16% to US$25.62/lb and lead to a 35% increase in pre-tax project NPV, taking it to US$309 million. These figures compare with those in the Feasibility Study of January 2020 (FS or Feasibility Study) at a U3O8 price of US$60/lb and an exchange rate of A$1:US$0.75.

Table 1: Key Financial Outcomes of the Enhanced Feasibility Study

*For comparative purposes only, key financial outcomes for the Feasibility Study are presented using a U3O8 price of US$60/lb and an exchange rate of A$1:US$0.75. Nothing in the above table changes the results of the Feasibility Study released on the ASX on 21 January 2020.

Boss considers a base case price of US$60/lb U3O8 over the LOM is reasonable given that current spot and term uranium prices are well below the price required to guarantee viability of a large proportion of the world’s existing production. Uranium analysts predict that a long-term spot price in the mid US$40’s will incentivise restart of idled production while a spot price closer to US$60/lb will be needed for most new mines.

The findings show Honeymoon is set to enjoy extremely robust margins given that contract prices for uranium are currently in the high US$30’s/lb.

The EFS found that CAPEX of US$80 million is required to re-start Honeymoon. This cost increase, compared to the FS (approximately ~US$10M), is directly related to Boss’ plan to remove the existing Solvent Extraction (SX) plant and replace it with an Ion Exchange (IX) plant much earlier in the mine life to shorten ramp up time and reduce technical risks associated with the existing solvent extraction plant.  This results in an increased production capacity of 2.45Mlb/annum of U3O8.

Boss Managing Director Duncan Craib said the EFS showed Honeymoon was firmly on track to be Australia’s next uranium producer.

“The study shows conclusively that the changes we plan to make to the processing plant will increase annual production, cut costs significantly and increase overall financial returns,” Mr Craib said.

“With forecast all-in costs of US$31.86/lb and contract uranium prices running in the high US$30’s/lb, Honeymoon is already poised to be an extremely robust project.

“The outlook is even stronger when viewed against the widely-held belief in financial and energy markets that the uranium price is set to continue climbing on the back of a supply shortage, declining inventories and growing demand due to its carbon-free status.

“This study demonstrates that Boss is perfectly placed to capitalise on a strengthening uranium market with an existing plant and mine in a tier-one location with low costs and strong financial returns.

“In conjunction with these outstanding results, the recently acquired strategic inventory of 1.25 million pounds of uranium enables Boss to continue to de-risk the planned re-start of the Honeymoon and provide increased flexibility as we continue to progress project funding and offtake negotiations.”

Mr Craib said that in light of the strong findings, and strengthening uranium market, Boss would also advance its exploration activities aimed at growing Honeymoon’s mineral resource and mine life at numerous highly promising near-mine and regional targets.

Technical Detail

Following the strong FS results released in January 2020, which already positioned Honeymoon as one of the world’s most advanced uranium development projects that can be fast-tracked to re-start production in 12 months, Boss focussed on building a more resilient and sustainable mining operation.

The production limitations and operational complexity associated with restarting the existing SX plant and then incorporating an IX plant were deemed unsatisfactory.

Boss embarked on a series of technical optimisation studies to improve Honeymoon’s position as a globally competitive mining operation.  These studies culminated in plans to remove the existing SX plant and replaced it with IX capacity to increase the production profile to 2.45Mlb/annum over a plus-10 year mine life and reduce operating costs to achieve industry benchmark goals for low-cost producers of AISC of US$25/lb and cash costs lower than US$20/lb.

Conservatively, the EFS provides a base case to fast-track uranium production from Honeymoon’s HRA utilising only 36Mlbs of the Project’s global JORC Resource of 71.6Mlbs. No further permitting is required to resume production and Honeymoon has a valid Uranium Mineral Export Permission for 3.3Mlb/annum.

This means there is substantial scope to extend the mine life and increase the EFS production nameplate capacity of 2.45Mlb/annum from the remaining identified JORC Resource. There are also significant resource growth opportunities from Honeymoon’s significant defined Exploration Target.

Boss and GR Engineering Services Limited (GRES) have redesigned the Honeymoon process plant to substantially increase the nameplate capacity without a large increase in overall footprint. Provision has also been made in the design to accommodate additional satellite IX input to the process plant to easily allow additional resources to be accessed in a spoke and hub model. Satellite IX capture and resin transport has been used successfully in the USA for decades and represents an efficient way to access resources which may be distant from a central processing facility.

To unlock this value, Boss’ geologists are in the field completing ground-based, low-cost and non-invasive geophysical surveys within its substantial 2,595km2 exploration package.   Following the completion of the surveys and subsequent interpretation of the results, the Company plans to undertake exploration drill programs to exploit the identified areas of interest commencing in the December quarter 2021.

The Company anticipates the satellite resources to allow both an increase in the overall production profile with minimal disturbance to operations and extend the mine life of the Honeymoon Project. Boss holds high expectations that its exploration activities will continue to deliver increase Resources. The Company has grown the global JORC resource from 16.6Mlbs to 71.6Mlbs (~331% increase) since acquiring Honeymoon in December 2015. 

Next Steps

The Company’s next steps are focused on:

  • Progressing off-take negotiations and project financing efforts, while advancing the project towards development; and
  • Developing a plan for increasing production profile and extending mine life through development of satellite
  • Progressing off-take negotiations and project financing efforts, while advancing the project towards development; and
  • Developing a plan for increasing production profile and extending mine life through development of satellite resources 
  • Maintaining a strong exploration focus, advance program on near-mine and regional targets.

The EFS was compiled with the assistance of several independent and reputable Australian-based engineering companies, global industry experts and qualified Boss personnel.

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