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Peninsula Energy raises $8.5M to continue uranium production ramp-up

Peninsula is insulated from current uranium prices through its existing long term contracts.
Peninsula Energy raises $8.5M to continue uranium production ramp-up
Peninsula is insulated from current uranium prices through its existing long term contracts.

Peninsula Energy (ASX:PEN) has raised $8.5 million through the placement of shares at $0.50 and intends to raise up to an additional $5 million through an in-the-money share purchase plan offer.

The funding will allow Peninsula to implement a streamlined operational strategy to enhance business performance from the uranium-producing Lance Projects located in Wyoming, U.S.

Shares in Peninsula are trading at $0.54 representing a healthy premium to the placement price of $0.50.

The placement was strongly supported by the company’s major institutional shareholders, Resource Capital Funds VI and Pala Investments.

Gus Simpson, CEO, commented:

"We are pleased to secure this funding which enables the company to continue the production ramp-up, implement a more streamlined operating strategy, meet deliveries under existing contracts and provides certainty on the convertible loans."


Background

Peninsula is producing uranium from the Lance Projects which have a mine life of at least 20 years, underpinned by 53.7 million pounds, the largest uranium ISR JORC-Code compliant resource in North America.

Uranium extraction from wellfields at the Lance Projects for the quarter ended 30 September 2016 was 54,000 pounds of uranium, an increase of 25,000 pounds of uranium over the quarter ended 30 June 2016.

Multiple headers houses are used to extract uranium and Stage 1 steady state production will see up to seven header houses in simultaneous operation.


Use of funds

Funds from the placement and share purchase plan will be used for:

- The construction and roll-out of additional header houses (header houses #8 to #10) at the Lance Projects (A$5.6 million);
- Working capital purposes including raising costs; and
- To repay debt drawn on the Investec revolving loan facility which is currently drawn to US$3.5 million (A$4.8 million).


Interim operating strategy

In light of current uranium market conditions, the company has reviewed the operating plan at the Lance Projects and has decided to implement an interim operating strategy until uranium prices normalise.

Under the interim strategy, the Lance Projects production forecast is aligned to delivery commitments under existing term contracts, maximising the value attained for the extracted resource.

Construction activity is almost complete on header house 7, which is planned to be ready for start-up by the end of December 2016.

Peninsula will continue with the roll out of additional header houses, as construction of header houses 8 to 10 will allow flowrates across all production wells to be varied, optimising operating costs and increasing average uranium head grade.

While the company will operate in line with the modified and low cost production plan on an interim basis, at full capacity the Lance Projects development plan comprises a three stage ramp up:

- Stage 1: production rate of between 500,000 and 700,000 pounds uranium oxide;
- Stage 2: production rate of up to 1.2 million pounds uranium oxide; and
- Stage 3: production rate of up to 2.3 million pounds uranium oxide.


Analysis

The successful $8.5 million placement and planned share purchase plan places Peninsula in a sustainable position going forward with ample cash funding.

The lower operating costs combined with high value term contracts from the interim operating strategy will see Peninsula move to sustainable cash generation in the first half of 2017, a significant achievement in the current market.

While the present uranium market is challenging, Peninsula is insulated from current prices through its existing long term contracts.

By implementing a managed production ramp-up, the company is well positioned to sustain itself through the current uranium market and then to expand quickly when the market improves.

Peninsula’s largest shareholders, Resource Capital Funds and Pala have again demonstrated their commitment to the company, both through participation in the placement and improvement in the terms of the existing convertible loan facility.

Peninsula has received a vote of confidence from the market as its shares trade at a premium to the placement price.

View full PEN profile

Peninsula Energy Timeline

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