Over the past two weeks, uranium mines in Canada and Namibia have ceased production, including the Cameco-owned Cigar Lake project (Canada), currently the world’s largest uranium mine.
The decision to cease production at these major uranium production locations has raised immediate supply concerns, which has resulted in the uranium spot price increasing from a low in mid-March of US$24.00 to US$27.50 per pound of triuranium octoxide (U3O8).
The portfolio of uranium concentrate sale and purchase agreements held by Peninsula contains a combination of committed sales and optional sales.
At the request of a customer, the company brought forward a sale of uranium originally scheduled for April 2020.
A total of 116,000 pounds U3O8 were sold in March at an average realised cash price of about US$35 per pound U3O8.
Cash proceeds of about US$4.1 million were received by Peninsula before the end of March.
The delivery was completed using uranium purchased on-market in combination with held inventory.
Peninsula’s weighted average future sales price for the remaining portfolio of uranium concentrate sale and purchase agreements now sits at the upper end of the guided US$51-$53 per pound range for up to 5.5 million pounds U3O8.
The company has assessed the ongoing workstreams at the Lance Project in the US and has made the prudent decision to suspend until further notice any non-essential site activities including the well completion work and the commencement of a field demonstration.
This decision was made to ensure the safety and wellbeing of all staff and contractors, and to protect the balance sheet during this period of volatility and uncertainty in the uranium and global financial markets.
In late December 2019, the company submitted to the Wyoming Department of Environmental Quality (WDEQ) the Interim Restoration Report (IRR) for the initial low pH field demonstration.
It was anticipated that the WDEQ would complete their review of the IRR by the end of the first quarter of the 2020 calendar, however, this is now expected to be completed during the second quarter.
Approval of the IRR is required to enable the use of the low pH ISR method in all undeveloped areas within the Ross Permit Area at Lance.
Additional cost-saving measures
In recognition of the current volatility in global financial markets and following on from the significant cost reduction initiatives announced in March 2020, Peninsula has implemented additional cost reduction measures.
The board and senior management have agreed to a 20% reduction in salaries and fees effective from 1 April 2020 until at least the end of the current financial year.
As at the end of the March quarter, the company had an available cash balance of about US$4.5 million, which includes the proceeds from the March sale.
Outcome of US Nuclear Fuel Working Group
Peninsula managing director and chief executive officer Wayne Heili said: “The COVID-19 pandemic has led to considerable global uncertainty and equity market volatility.
“However, we are committed to both carrying the Company through these challenging times and ensuring we are well prepared on the other side to resume our core activity of producing uranium for the US domestic and global markets.
“With this in mind, we have acted quickly to ensure the safety and wellbeing of all Peninsula employees and contractors, by suspending non-essential activities.
“COVID-19 has led to an industrywide curtailment of uranium production which has caused widespread supply disruption.
“Once through this COVID-19 crisis and when uranium production activities normalise, it is my hope that the global operators of nuclear power plants once again properly recognise the value of secure supply generated by having multiple viable uranium mining operations located in diverse jurisdictions.
“Further to this, shareholders will be aware the Company has been awaiting the outcome of the US Nuclear Fuel Working Group (NFWG) as a likely catalyst for US-based uranium production.
“We are not anticipating any development on this front in the near-term while the US Federal Government prioritises management of COVID-19, but US government officials continue to affirm the national importance of preserving a domestic uranium production capacity.”