Marenica completes Nambia study

Marenica Energy has estimated it will cost $US260 million to develop its Marenica uranium project in Nambia.

The company has completed a scoping study which forecasts the project could deliver 3.5 million pounds of uranium per year at the estimated capital cost of $US38 a pound through a heaped leaching operation.

SRK Consulting completed the scoping study and found the Marenica project could produce a total of 45 million pounds of uranium over a 13-year life based on the existing defined indicated and inferred mineral resource.

"This is a significant increase on the Company's earlier expectations as a result of the decision to develop a bulk open pit and heap-leach operation with a lower cut-off grade of 50ppm, rather than as a continuous agitated leach circuit fed by higher-grade ore," the company said in a statement to the Australian Securities Exchange.

"This study shows that the Marenica project stands to become one of the more significant uranium producers in the world," Marenica chief executive John Young said.

"This mine is expected to support an operation with a greater production profile than was originally believed possible in an agitated leach circuit. We believe the option presented in this study represents an achievable, realistic view given the size of the resource at Marenica," he said.

See company statement below:

Marenica Energy (ASX:MEY) is moving closer to becoming a leading uranium producer, after scoping study finds the Marenica Project in Namibia could deliver 3.5 million pounds of uranium per annum at the highly competitive operating cost of US $38 a pound. The study focussed on the development of a heap leach operation that has an estimated capital cost of US $260 million.

Undertaken by SRK Consulting, the study found the Marenica Project could produce a total of 45 million pounds of uranium over a 13-year life based on the existing defined indicated and inferred mineral resource. This is a significant increase on the Company's earlier expectations as a result of the decision to develop a bulk open pit and heap-leach operation with a lower cut-off grade (COG) of 50ppm, rather than as a continuous agitated leach circuit fed by higher-grade ore. SRK Consulting ran Whittle optimisations on several models at different cut off grades and determined the optimum marginal COG at 50ppm for the heap leach scenario (see table 2).

"This study shows that the Marenica project stands to become one of the more significant uranium producers in the world," Marenica Chief Executive John Young said.

"This mine is expected to support an operation with a greater production profile than was originally believed possible in an agitated leach circuit. We believe the option presented in this study represents an achievable, realistic view given the size of the resource at Marenica."

Mr Young said Marenica believed that infill drilling should expand the resource base to further boost the project's economics.

The Mineral Resource Estimate was updated by SRK Consulting using a 50ppm LCOG deemed to be appropriate for bulk mining methods (see table 1) and has been reported in accordance with the guidlines given in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2004 (the JORC Code). The revised estimate is tabulated below but in total SRK has defined a total resource of 648 million tonnes at 97ppm U3O8 for 138M lbs.

The mining optimisation study defines a potentially minable 270M tonnes of low‐grade oxide ore, to be processed as run of mine heap‐leach material. The mineralisation is upgraded through a combination of screening and scrubbing, with approximately 50% of the run of mine ore discarded as waste prior to processing. This upgrade process reduces the ore to be processed over the life of mine to 135M tonnes, and potentially increases process grades to 193ppm U3O8 using a conservative upgrade factor of 1.8 times, this is to be confirmed but is believed achievable based on work by ANSTO. Previous metallurgical work by ANSTO has shown that ROM material can be upgraded 2.5 to 3.5 times.

The mining costs are based on an assumed US $1.00/t for palaeochannel material movement at the reference level, and US $1.30/t for basement material due to the expected requirement for shatter blasting. No incremental adjustments above and below the reference level have been applied as the pits are expected to be only 80m deep. The SRK report notes that the model creates realistic, minable shells due to the block size of 50m x 50m x 5m (xyz), and that creating pit designs from these shells will not significantly increase the stripping ratio and hence not significantly reduce the cashflow. The tonnages determined by Whittle were (flat line) scheduled over a 13 year (heap leaching) minimum mine life, with pre‐stripping of waste in the year before production starts. The mine optimisation is based on current indicated and inferred mineral resource and the proposed upgrade of these inferred resources by further drilling should improve resource confidence and further enhance the already attractive project economics.
In order to achieve the ore processing rate of 10.3 million tonnes per annum (Mtpa) after scrubbing, and around 64 Mtpa total material movement, mining cost estimates are based on using a combination of Caterpillar 785 trucks (136 t) loaded by a Komatsu PC4000 excavator. Eight excavators and around 44 trucks are required, and mining services have been costed as contract only.

The estimated capital cost is expected to be US $260M for the crushing, screening and process facility including a 10Mtpa On/Off leach pad, ancillary infrastructure and closure costs. The metallurgical work currently underway at AMMTEC involves a series of upgrade, agglomeration and column leach tests. The aim is to produce an upgraded dry (screened) product that is combined with an upgraded (scrubbed) slurry that will be agglomerated as preparation for column leaching.

This work is being supervised by Kappes, Cassiday & Associates, who specialise in the development, engineering and implementation of extractive metallurgical processes for the mining industry and have particular expertise in heap leaching. The results of this column leach test work will provide critical information on leaching kinetics, water and reagent use that will allow further optimization of the costs used in the current economic model.

Operating and capital costs used to develop this scoping study were based on industry standard capital and operating cost data for similar sized mining, production processes. Using a long term uranium price of US $65 a pound, the study indicates that the Marenica project can produce a positive NPV and IRR and pay back the initial project capital in 5 years (see table 4). It is to be noted that this economic model is based on inferred and indicated resources. The results of the study have provided Marenica with the confidence to undertake additional drilling and metallurgical work in order to upgrade inferred resources, which should continue to improve the economic parameters of the project.

Upon sufficient indicated resource being delineated a definitive feasibility study will commence. The project described in the scoping study will require mining and environmental permits and a site‐wide Environmental and Social Impact Statement (ESIS). Preliminary work required for the ESIS, such as baseline water sampling, meteorological and dust monitoring, will begin in November 2010. The scoping study assumes receipt of all required permits to construct and operate the mine and plant within three years. Management believes that construction and commissioning of the plant would take place in 2013 and 2014.