The raising follows results from Bannerman’s heap leach demonstration plant at its wholly-owned Etango uranium project in Namibia, which identified a number of opportunities to reduce operating and capital cost estimates from the 2012 Definitive Feasibility Study (DFS).
The funds raised will be primarily used for engineering studies to quantify the extent of those cost reduction opportunities and to give the company sufficient working capital to see the uranium cycle improve.
Shares will be issued to institutional and sophisticated investors including existing shareholder, Resource Capital Fund VI L.P.
Bannerman CEO Brandon Munro commented: “We are delighted with the strength of the response to our placement offering.
“It is a testament to the quality of the Etango project and its outstanding positioning to capitalise on an expected rebound in uranium market prices over coming years.”
Use of funds
Funds raised will be largely used for engineering designed to assess and quantify opportunities to reduce Etango project cost estimates.
The cost reduction opportunities have arisen from the company’s successful Heap Leach Demonstration Program. The recently completed Phase 5 test work indicated potential for optimisation and cost savings including:
- Recovery of 93% in 22 days (compared with the 87% estimate in the DFS)
- Acid consumption approximately 25% less than the DFS
- Potential for other reagent savings, including binder
- Consistent recovery at coarser crushing and the potential to substitute high pressure grinding rolls with conventional crushing.
The potential wins from binder reduction and changes to the crushing circuit warranted commencement in October of an additional Phase 6 of the program.
Overall, the potential operating and capital cost savings could add tens of millions of dollars to the Etango project’s published NPV.
The raising also provides Bannerman with working capital that will fund the company into 2018.
Bannerman’s Etango Project is located near Rio Tinto Ltd’s (ASX:RIO) Rössing uranium mine, Paladin Energy Ltd’s (ASX:PDN) Langer Heinrich uranium mine and China General Nuclear Power Corp’s Husab uranium mine currently under construction.
A definitive feasibility study (DFS) has confirmed the technical, environmental and financial (at consensus long term uranium prices) viability of a large open pit and heap leach operation.
Based on the DFS, production is expected to be 7-9 million pounds U3O8 per year for the first five years and 6-8 million pounds U3O8 per year thereafter.
This scale makes Etango the world’s largest uranium project that is not held by a state owned entity or major.
Since 2015, Bannerman has conducted a large-scale heap leach demonstration program to provide further assurance to financing parties and generate process information.
Current mine life of 16 years from a reserve of 130 million pounds U3O8 has significant expansion potential through the conversion of existing Inferred Resource as well as the deposit being open at depth.
Environmental clearance and accessible infrastructure positions the project for financing once the uranium price recovers.
Securing $4 million in an oversubscribed placement is a vote of confidence for both the Etango uranium project and the uranium market outlook.
Having Resource Capital Funds (a mining-focused private equity firm with a strong focus on governance and due diligence) support the raising, shows the institutional grade investment Etango represents.
This is complimented by the addition of several institutional investors and influential high net worth individuals amongst the raising.
The uranium market continues to show evidence of tightening through diminishing supply.
The further decline in the uranium price is, paradoxically, a good sign for a recovery as a greater proportion of world production will be uneconomic at this price, leading to supply disruption occurring sooner.
On the demand front, a number of milestones have been achieved in China, Russia, India and the U.K.
China’s nuclear program continues to gain momentum with the Fuqing #3 reactor connected to the grid during the September quarter.
This is the 35th operational nuclear power reactor in China. Russia and India also commissioned new reactors.
The U.K. government approved construction of two large reactors at Hinkley Point C while Russia announced it would construct 11 new reactors by 2030.
As market sentiment for uranium shows signs of improvement, the Etango project continues to emerge as one of the world’s largest undeveloped uranium projects, a fact that gives Bannerman sector leading valuation leverage to a uranium price recovery.
The spot uranium price has declined to US$20/lb - a decrease of 33% since Munro took the reins in March.
Nonetheless, shares in Bannerman are trading up 25% over the past three months, currently priced at $0.033.