Peninsula Energy Ltd (ASX:PEN) (OTCMKTS:PENMF) (FRA:P1M) is sticking to its US focus with a clear pathway to resume uranium production at its flagship Lance Project in Wyoming, US, the only US-based uranium project authorised to use the industry-leading, low-cost, low pH In-Situ Recovery (ISR) process.
The company is also the only ASX-listed uranium company that has the immediate ability to take advantage of US government programs supporting domestic uranium mines.
Key US market opportunities
In the US, there is bipartisan political support for a long-term buying program from US uranium mines.
A total of US$75 million has been approved in the US 2021 financial year budget to purchase US-produced uranium.
In addition, legislation is advancing in the US Senate to support Advanced Nuclear Energy Initiatives, including the Strategic Uranium Reserve purchases.
Peninsula believes that the establishment of the Uranium Reserve will provide a substantial opportunity to secure new uranium offtake agreements with the US DOE.
To further boost its case, the government, in October 2020, extended the amended Russian Suspension Agreement by 20 years.
This limits Russian-origin uranium and opens market opportunities for US uranium producers.
Established uranium sales contract book
Peninsula is the only junior uranium producer with long-term sales contracts extending to 2030, representing about 15% of projected Lance FS LOM production.
It has current contracts in place for up to 5.5 million pounds at US$51-$53 per pound of uranium, with major utilities in both the US and Europe.
The company made 75,000 pounds of uranium deliveries in the fourth quarter of 2020, generating a net cash margin of US$1.4 million 450,000 pounds to be delivered annually in 2021 and 2022.
It has already secured 2021 uranium sales with a net cash margin of US$6-8 million.
It has matching binding contract sales with market purchase agreements.
Peninsula’s strong existing relationships with preferred customers will serve as a base for future business opportunities.
Using industry-leading method
Commercial operations were suspended midway through 2019, to allow the on-site team to focus on preparing for a transformation of Lance’s process chemistry applications.
The Strata team has successfully obtained the necessary amendments to its regulatory authorisations, which allow Lance to operate using a low pH ISR process in addition to the originally authorised alkaline ISR process.
Around 57% of uranium produced globally in 2019 was extracted through the low pH ISR process.
Companies which utilise this process operate within the lowest quartile of cash costs for global uranium producers.
Importantly, Lance is the only US-based uranium project authorised to use this industry-leading method.
One of largest US uranium projects
Lance is one of the largest US uranium projects in size and scale, with a 53.6 million pounds uranium JORC 2012-compliant resource base.
It is licensed to produce up to 3 million pounds uranium per annum and its current Stage-1 plant capacity is at 1.15 million pounds uranium per annum.
Production is currently paused awaiting a transition to low pH ISR and the project has an estimated six-month lead time to return to production (post a restart decision).
The re-start decision depends on sustained improvement in market conditions and satisfactory progression of current low pH optimisation activities.
Active low pH field demonstration
Peninsula Energy maintained three new full-scale in-situ recovery patterns at a total design flow rate of 75 gallons per minute during the December 2020 quarter at the Lance Project.
A low pH field demonstration began in the September 2020 quarter focusing on an unmined area of Mine Unit 1 (MU1A) and is expected to run for 12-18 months.
The overall performance of the MU1A field demonstration to date has been meeting expectations with the groundwater system pH having dropped from more than 8 to below 4 en route to target 2 with bicarbonate eliminated from the production system.
Stronger oxidants, as used in the laboratory studies, will be tested as a means to enhance the rate of oxidation change as necessary to achieve the ideal conditions for uranium solubility.
The pilot recovery plant with scaled ion-exchange units will be activated upon reaching target production stream chemist
Global X Uranium ETF
Peninsula was added to the Global X Uranium ETF (URA) Index composition with effect from February 1, 2021.
Global X URA has net assets of US$270 million and is currently accumulating shares of Peninsula.
Due to increasing North American-based investor interest and following the end of the quarter, Peninsula upgraded from the Grey List to the US OTC (over-the-counter) Pink Market in January 2021.
Admission to the OTC Market is non-dilutive, as no additional capital is required to be raised and no new shares will be issued.
An application has been submitted to upgrade its trading to the OTCQB Venture Market tier.