Mr. Ross McElroy reports
FISSION'S PFS SHOWS LOW OPEX OF US$6.77/LBS U3O8, HIGH IRR AND CLEAR GROWTH
Fission Uranium Corp. has released the results of a prefeasibility study (PFS), conducted by Roscoe Postle Associates Inc. (RPA), and first-time estimate of mineral reserves for its Patterson Lake South (PLS) property in Canada's
Athabasca basin region. With an estimated opex (operating expenditures) of just $6.77 (U.S.)/pound U3O8 (triuranium octoxide) and an IRR (internal rate of return) (pretax) of 29 per cent, the PFS further enhances the potential for highly economic production at PLS. In addition, with the R780E zone still open at depth and along plunge to the east and the recently discovered high-grade mineralized zones along strike to the west and east (R1515W, R840W and R1620E zones) yet to be included in the reserve mine plan, there is clear upside for expanding the resource base and mine life and further improving the economics. The PFS is based on an open-pit/underground hybrid operation and the company is also progressing a PEA-level underground-only alternative scenario that indicates potential for improved economics.
Robust economics including very low operating costs (opex):
Opex of $6.77 (U.S.)/pound U3O8; opex substantially less than the 2015 PEA technical report for PLS which estimated $12.38 (U.S.)/pound;
- Production averaging almost 15 million pounds U3O8 per year over the first five years from mineral reserves of 90.5 million pounds U3O8;
- IRR (pretax) of 29 per cent;
- NPV (net present value) (pretax), discounted at 8 per cent, of $1.32-billion;
- Payback in two years (pretax);
- Initial capex (capital expenditures) of $1.49-billion, and sustaining capital (including reclamation and closure) of $214-million;
High processing recovery rate of 96.7 per cent;
- Four-year construction period and 8.2-year mine life.
Increased indicated resource
Indicated resources contain 103,768,000 pounds U3O8, an increase of 18 per cent compared with the previous mineral resource estimate, reported Feb. 20, 2018.
Demonstrated scope for substantial growth:
Additional zones: The PFS mineral reserves are based on the indicated resources of the R780E and R00E zones. There are three other mineralized zones along strike that do not yet have sufficient drilling to classify the majority of their resources to indicated, and future programs will work to advance this. These include the R1515W, R845W and R1620E zones.
- Zone expansion: The R780E zone is open at depth and along plunge to the east and further opportunity exists to continue to grow the resource in those directions, potentially extending the underground mine life.
Mineralization upgrade: The PFS mine plan does not include areas of inferred resources in the R00E and R780E zones. Additional drilling has the potential to convert these to indicated.
Flexible mining approach:
The PFS base case for production at PLS is a hybrid operation (open pit and underground), aimed at maximizing extraction of R780E and R00E resources. However, it also has the potential to be mined as a purely underground operation.
A continuing PEA-level underground-only scenario shows potential for improved economic results, including:
- Three-year construction period and 7.3-year operation (based on the same indicated resources as the PFS base case);
Lower initial capex of $1.19-billion;
- All-in opex of $7.17 (U.S.) per pound;
- Pretax IRR of 36 per cent, NPV at 8 per cent of $1.31-billion, and a 1.9-year payback;
Reduced footprint and environmental impact;
- This PEA-level scenario is preliminary in nature and is based on assumptions and estimates that are not at a PFS level of detail and therefore cannot be categorized as mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is no certainty that the PEA results will be realized.
Ross McElroy, president, chief operating officer, and chief geologist for Fission, commented: "This prefeasibility study presents a very strong base case for production at PLS and further improves the potential economics and derisks the project. Particular highlights include very low operating costs, a high internal rate of return, and broad scope for growth and optimization. It also includes the important milestone of estimating mineral reserves at PLS. The focus of the report is production from the R00E and R780E zones. Moving forward, we have the potential to add resources to these two zones, and from the three other known mineralized zones, which may increase mine life and improve economics. Over all, we are very pleased with the results of the report and we are continuing to advance PLS towards feasibility status."
The PFS has an effective date of April 9, 2019, and supersedes all previously filed technical reports for PLS.
The PFS was prepared by independent consultants led by RPA, which carried out resource and reserve estimation and mining work, assisted by BGC Engineering Inc. (geotechnical aspects), Bauer Foundations Canada Inc. (dike and slurry cut-off wall), Wood Canada Ltd. (process and infrastructure), Clifton Associates Ltd. (environmental and tailings) and Arcadis Canada Inc. (radiological considerations).
In addition to managing radiological issues common to high-grade uranium mining, a key technical challenge to developing the operation will be water control related to Patterson Lake and saturated sandy overburden. The PFS proposes a system of dikes and slurry cut-off walls -- proven techniques successfully implemented at a number of Canadian mining operations, including the Diavik diamond mine and the Meadowbank gold mine. The development scenario does not require any new, untested, conceptual mining or construction methods. Since the PEA, extensive field programs have been carried out to confirm overburden characteristics, with these test results forming the basis of the PFS estimates.
Mineral resources were updated for the PFS by RPA using data collected up to and including 2018 diamond drilling campaigns. Estimated block model grades are based on chemical assays only.
The Triple R deposit as defined in the mineral resource estimate comprises several nearly vertical stacked lenses across five mineralized zones that are generally oriented with an azimuth 66.2 degrees. A set of cross-sections and level plans were interpreted to construct a total of 82 three-dimensional wireframe models (domains) for the mineralized zones at a minimum grade of 0.05 per cent U3O8. Of the 82 wireframes, 16 are high-grade domains created at a minimum grade of approximately 5 per cent U3O8, which are enveloped within the low-grade domains.
Block model grades were interpolated by inverse distance cubed (ID3). Classification into the indicated and inferred categories was guided by the drill hole spacing and the continuity of the mineralized zones.
The updated resource estimate represents an 18-per-cent increase in pounds U3O8 classified as indicated as compared with the previous mineral resource dated Feb. 20, 2018. The increase in resource classified as indicated is primarily due to infill drilling and conversion of inferred resources.
MINERAL RESOURCE STATEMENT -- OCT. 23, 2018
Classification Tonnes Grade Grade Contained U3O8 Gold
(% U3O8) (Au g/t) (lb) (oz)
Open pit 1,609,000 2.33 0.58 82,753,000 30,100
Underground 931,000 1.02 0.48 21,015,000 14,300
Total indicated 2,540,000 1.85 0.49 103,768,000 44,400
Open pit 40,000 0.62 0.24 551,000 300
Underground 1,198,000 1.23 0.50 32,334,000 19,300
Total inferred 1,238,000 1.20 0.49 32,886,000 19,600
CIM (Canadian Institute of Mining, Metallurgy and Petroleum) definitions
(2014) were followed for mineral resources.
Mineral resources are reported inclusive of mineral reserves.
Mineral resources are reported within an open-pit design at a cut-off
grade of 0.15 per cent U3O8 and 0.25 per cent U3O8 for resources outside
the pit that are potentially mined by underground methods.
The cut-off grades are based on price of $50 (U.S.) per pound U3O8 and
an exchange rate of 0.75 C$/US$.
A minimum mining width of 1.0 m was used.
Numbers may not add due to rounding.
A first-time estimate of mineral reserves for the project was carried out by RPA based on an open pit that captures all of the high-grade indicated resources in the R780E and R00E zones. Similar in concept to the 2015 PEA, the PFS base case design includes a sand dike and plasticized cement slurry cut-off wall projecting into Patterson Lake, and an on-site processing plant and associated infrastructure. Updates to the mineral resources and geotechnical understanding of the overburden and host rock are incorporated, based on field data collection programs and subsequent analysis.
Outside of the open pit, underground mineral reserves are based on designs for transverse and longitudinal long-hole stoping, accessed via a portal located within the open pit, and two ventilation raises also located within the pit. Mineral reserves are summarized in the associated table.
MINERAL RESERVE STATEMENT -- APRIL 9, 2019
Classification Tonnes Grade Contained U3O8
(% U3O8) (lb)
Open pit 2,296,000 1.62 82,262,000
Underground 592,000 0.63 8,236,000
Total probable 2,888,000 1.42 90,500,000
CIM (Canadian Institute of Mining, Metallurgy and Petroleum)
definitions (2014) were followed for mineral reserves.
Open-pit mineral reserves are reported within mining shapes built
within the open-pit design at a cut-off grade of 0.15 per cent
Underground mineral reserves are reported using stope shapes
generated with a 0.25-per-cent U3O8 minimum grade.
The cut-off grades are based on price of $50 (U.S.) per pound
U3O8 and an exchange rate of 0.75 C$/US$.
For underground mining, a minimum mining width of 3.0 m was used.
Numbers may not add due to rounding.
Resource to reserve conversion was high, with modest mining losses (part of the modifying factors that differentiate reserves from resources) consisting of:
- Isolated resource blocks in the open pit that cannot be separated from waste;
- Low-grade open-pit resource blocks below cut-off after dilution;
- Underground resource blocks not included in designed stopes;
- 95-per-cent extraction factor on underground stopes.
PFS base case life-of-mine (LOM) plan summary
- A four-year construction period, consisting of dike building, slurry cut-off wall installation, dewatering, overburden removal, and plant and infrastructure construction;
Six years of open-pit operations at 1,000 tonnes per day (tpd) ore, 12,000 tpd moved;
Followed by two years of underground operations at 1,000 tpd ore;
2.89 million tonnes processed over 8.2 years, grading 1.42 per cent U3O8;
Process recovery of 96.7 per cent, based on updated metallurgical testwork;
Production of 87.5 million pounds of U3O8, including an average of 14.35 million pounds per year for the first five years.
- Uranium price of $50 (U.S.)/pound U3O8, based on long-term consensus forecasts;
Exchange rate of 75 U.S. cents:$1;
- Gross revenue of $5,837-million;
Less Saskatchewan government gross revenue royalties of $423-million;
Net revenue of $5,413-million.
- Average operating costs of $9.03/pound U3O8 ($6.77 (U.S.)/pound U3O8);
Unit operating costs of $274 per tonne processed;
Surface and general and administrative expenses of $71/t;
Total operating costs of $790-million;
Operating cash flow of $4,623-million.
- Preproduction capital costs of $1,498-million:
Dike and slurry cut-off wall $371-million;
- Open-pit mining $44-million;
Process plant $241-million;
Tailings facility $101-million;
Indirects and owner's costs $376-million;
Sustaining capital costs of $137-million;
Reclamation and closure costs of $77-million.
- Pretax cash flow of $2.91-billion;
Income tax and Saskatchewan profit royalties of $1,151-million;
After-tax cash flow of $1,759-million;
Pretax NPV (at a discount rate of 8 per cent) $1,319-million;
Pretax IRR of 29 per cent;
After-tax NPV (at a discount rate of 8 per cent) $693-million;
After-tax IRR of 21 per cent;
Payback period of two years (pretax).
Underground-only PEA-level scenario
An alternative scenario involving sinking shafts on land and developing underground workings below Patterson Lake eliminates the need for the dike and slurry cut-off wall construction prior to mining. Featuring a reduced footprint and environmental impact, this scenario results in some improved economic outcomes (such as reduced initial capital costs), despite the loss of some indicated mineral resources to a crown pillar.
Item Units PFS base case UG-only PEA case
Construction period years 4 3
Mining mt 2.89 2.25
% U3O8 1.42 1.64
Mine life Years 8.2 7.3
Production m lb U3O8 90.5 81.4
Operating costs $/t 274 335
$/lb U3O8 9.03 9.57
Initial capital cost $ m 1,498 1,194
Sustaining capital cost $ m 137 258
Pretax cash flow $ m 2,910 2,587
After-tax cash flow $ m 1,759 1,533
After-tax NPV@8% $ m 693 696
After-tax IRR % 21 26
This PEA-level scenario is preliminary in nature and is based on assumptions and estimates that are not at a PFS level of detail and therefore cannot be categorized as mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is no certainty that the PEA results will be realized.
Fission plans to advance the underground-only scenario to PFS level, for direct comparison to the base case, and decision making going into FS.
Conclusion of winter program
The company also announces it has completed the winter 2019 work program at PLS. The final work elements included:
Dual-purpose resource expansion and geotechnical rock-mechanic drilling (three holes, see news release dated March 19, 2019);
- Dike cut-off drilling (16 holes);
- Water monitoring drilling (four holes);
- Potential tailings management facility drilling (10 holes).
PLS mineralized trend and Triple R deposit summary
Uranium mineralization of the Triple R deposit at PLS occurs within the Patterson Lake conductive corridor and has been traced by core drilling over about 3.18 km of east-west strike length in five separated mineralized zones which collectively make up the Triple R deposit. From west to east, these zones are: R1515W, R840W, R00E, R780E and R1620E. Through successful exploration programs completed to date, Triple R has evolved into a large, near-surface, basement-hosted, structurally controlled high-grade uranium deposit. The discovery hole was announced on Nov. 5, 2012, with drill hole PLS12-022, from what is now referred to as the R00E zone.
The R1515W, R840W and R00E zones make up the western region of the Triple R deposit and are located on land, where overburden thickness is generally between 55 m and 100 m. R1515W is the westernmost of the zones and is drill defined to about 90 m in strike length, about 68 m across strike and about 220 m vertical and where mineralization remains open in several directions. R840W is located about 515 m to the east along strike of R1515W and has a drill defined strike length of about 430 m. R00E is located about 485 m to the east along strike of R840W and is drill defined to about 115 m in strike length. The R780E zone and R1620E zones make up the eastern region of the Triple R deposit. Both zones are located beneath Patterson Lake where water depth is generally less than six metres and overburden thickness is generally about 50 m. R780E is located about 225 m to the east of R00E and has a drill-defined strike length of about 945 m. R1620E is located about 210 m along strike to the east of R780E, and is drill defined to about 185 m in strike length.
Mineralization along the Patterson Lake corridor trend remains prospective along strike in both the western and eastern directions. Basement rocks within the mineralized trend are identified primarily as mafic volcanic rocks with varying degrees of alteration. Mineralization is both located within and associated with mafic volcanic intrusives with varying degrees of silicification, metasomatic mineral assemblages and hydrothermal graphite. The graphitic sequences are associated with the PL-3B basement electromagnetic (EM) conductor.
Patterson Lake South property
The 31,039-hectare PLS project is 100 per cent owned and operated by Fission Uranium. PLS is accessible by road with primary access from all-weather Highway 955, which runs north to the former Cluff Lake mine and passes through the nearby UEX-Areva Shea Creek discoveries located 50 km to the north, currently under active exploration and development.
This news release describes an updated mineral resource estimate, a first-time mineral reserve estimate, and a PFS life-of-mine plan and cash flow based upon geological, engineering, technical and cost inputs developed by RPA and other study participants. A National Instrument 43-101 technical report will be filed on SEDAR and made available on the company's website within 45 days. The technical information in this news release has been prepared in accordance with the Canadian regulatory requirements set out in National Instrument 43-101 and reviewed and approved by Jason Cox, PEng, of RPA, an independent qualified person.
On behalf of the company, the technical information in this news release has been prepared in accordance with the Canadian regulatory requirements set out in National Instrument 43-101 and reviewed on behalf of the company by Mr. McElroy, a qualified person.
About Fission Uranium Corp.
Fission Uranium is a Canadian based resource company specializing in the strategic exploration and development of the Patterson Lake South uranium property -- host to the class-leading Triple R uranium deposit -- and is headquartered in Kelowna, B.C.
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