Toro Energy Ltd (ASX:TOE) has received a A$0.07 per share price target from Dundee Capital Markets.
The following is an extract from the report.
Conventional Beneficiation Improvements Confirmed
We recommend Toro Energy as a NEUTRAL and maintain our target price at A$0.07, based on a 0.8x multiple applied to our 10% DCF estimate.
Ongoing beneficiation studies at the relatively high-cost Wiluna Uranium Project in Western Australia confirm results from last May; a simple screen and de-slime beneficiation process could upgrade the majority of mill feed.
The goal is to improve efficiency and reduce costs by creating a higher grade, lower mass concentrate as mill feed.
Several improvements were made recently, such as increasing resource size and grades, positive beneficiation testwork, completion of public consultation for environmental approvals, and completion of a Traditional Owners Agreement.
Permitting of the 3rd and 4th deposits are due by YE16.
Toro is confident that this beneficiation can be scaled up.
Results show:
- High grade mineralization can be upgraded to 3.3x original grade (previously 4.5x was suggested), mass reduced to 27% the original mass, 16% loss of total uranium.
- Beneficiation is not grade dependent; it can be achieved across all grades from 220 ppm to over 2000ppm.
- Upgrading works best on clay-rich or fine grained sediments, which is a significant portion of the deposits. Even lacking clay, de-sliming still removes the fine grain fraction to improve the concentrate and efficiencies.
Beneficiation method is conventional and simple.
Uranium mineralization (carnotite) is typically associated with a particle size range of between a fine fraction (< 5.5 micron) and a coarse fraction (>75 micron).
A simple combination of a screen to separate the coarser fraction and cyclones to remove the finest fraction should concentrate the majority of the uranium without significant loss.
Test work was completed on seven drill core type samples of >500 ppm from the Centipede-Millipede and Lake Maitland deposits by Strategic Metallurgy.
The next step is leach testing on beneficiated concentrates.
Redesign of flowsheet should allow further improvements.
Leach testing, mine plan rescheduling and flowsheet reengineering is underway. Potential economic benefit of beneficiation is likely to extend beyond direct improvements; it could also provide flow-on benefits later during processing. Toro suggests a re-design of the flowsheet may yield significant improvement to project economics.
We see two potential outcomes:
1) mining and production increases to take advantage of newfound room in the processing plant; or
2) mining and production remain flat while Capex declines. Both options should decrease Opex; capex wasn't mentioned in today's press release.
We speculate that these changes might improve Opex by between 10% and 35%, although scrubber and cycle costs and reagent consumption adjustments were not considered.
We have not incorporated changes into our 10% DCF model. We currently assume US$230 MM of capital expenses, and US$37.26/lb U3O8 for operating costs.
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