REG - Neo Energy Metals - Independent Study confirms Henkries economics
06/06/2024 07:00
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RNS Number : 3261R Neo Energy Metals PLC 06 June 2024
Neo Energy Metals plc / LSE: NEO, A2X: NEO / Market: Main Market of the London
Stock Exchange
6 June 2024
Neo Energy Metals plc
('Neo Energy' or 'the Company')
Updated Independent Study Confirms Robust Economics for the Henkries Uranium
Project
Neo Energy Metals plc, the near term, low-cost uranium mine developer, is
pleased to announce that the key findings from the independent report,
recently completed by South African based mining consultancy group Erudite
Strategies ('Erudite'), have confirmed the low operating cost (Opex) and
capital cost (Capex) and overall robust project economics of the Henkries
Uranium Project ('Henkries' or 'the Project') located in the Northern Cape
province of South Africa.
Summary
· Erudite has completed an independent update of both the operating and
capital cost estimates previously defined in the feasibility study completed
on the Henkries Project by Anglo Operations Limited (Anglo American) in 1979.
· The Erudite study confirms Henkries can be accelerated into
production at a lower capital and operating cost compared to many of its
peers.
· Financial modelling of the detailed cost estimates has further
confirmed the Project's robust and attractive underlying economics.
· The Project economics were assessed based on three potential
operating scenarios, comprising, a Low Case, Competent Person Report Case and
the Initial Target Case.
· All three scenarios demonstrated positive and robust project
economics for the initial 10-year mining and processing period, at an average
US$90/lb U3O8 price and 8% discount rate.
· Key Results from the Competent Person Report (CPR) Case, (based on
the summary resource data and technical assumptions defined in the Prospectus
CPR of November 2023, for a 7Mlb U3O8 resource) comprise:
o Annual average production of 567,000 lb U3O8
o Annual average sales revenue of US$ 51.0M
o C1 Cash operating cost US$ 36.8/lb U3O8 produced.
o Initial Capex US$ 52.2M, Sustaining Capex US$ 17.3M
o NPV US$ 106.6M, IRR 43.4%
o Payback 2.9 years
· The operating and capital cost outputs of the Erudite independent
study and resulting project economics have surpassed the Company's previous
expectations.
· The Erudite Study outcomes support the Board's view that the Henkries
Project can be fast tracked to production at the earliest possible
opportunity.
· The Company will commence resource expansion drilling in H2 2024,
aimed at increasing the total JORC compliant resources to over 10Mlb U3O8.
· Discussions are continuing with various parties, including the
Company's major shareholder, in connection with planned uranium offtake
arrangements and the mines' development timetable and financing options.
Erudite Study Work
Erudites' independent capital and operating cost update was based on the 1979
Feasibility Study Report completed by Anglo American on the Henkries Project
(the 'Erudite Study').
The mining and processing baseline used in the Erudite Study, remain unchanged
from the previously completed feasibility study. The design of which was
based on a 254t bulk sample of ore sourced from 211 test pits and fed into a
metallurgical pilot plant over a six month period.
The Mechanical Equipment List (MEL) for the processing plant was updated in
the Erudite Study in line with the most appropriate and cost effective
currently available technology. Budgetary quotes were obtained for the major
items of equipment, key major works (including Tailings Storage) and transport
costs for construction. In line with long established engineering practices
the full investment costs for the project were then factored from the MEL.
Owners' costs, contingencies and sustaining capital were added to derive a
Total Investment Value.
For the mine and process plant operating costs, updated quotes were obtained
for reagents, and supply services and major operating contracts. The balance
of the costs for labour, fuel consumables etc. were derived from prevailing
regional costs and database sources, to arrive at an equivalent of a C1 cash
cost.
Financial Models were generated based on the Erudite Study outcomes, for three
operating scenarios, comprising; a Low Case, Competent Person Report Case and
the Initial Target Case for the development of the project defined as:
1) Low Case - assuming the project is developed based on the current
4.7Mlb U3O8 JORC resource,
2) Competent Person Report Case - assuming that JORC resources are
increased to 7Mlb U3O8, as supported in the Henkries Competent Persons Report
published in November 2023, (after updating the Mineral Resource Estimate
based on the analysis of available historical drill samples and the infill
drilling at Henkries North being completed in H2 2024), and.
3) Initial Target Case - assuming the 10Mlb U3O8 JORC resource target of
the current exploration program is achieved.
Erudite Study Report Highlights
The update of the project's Capex and Opex confirms the excellent current
economic potential for near term development of Henkries to production. The
extensive data currently available on the project is more than sufficient to
springboard straight into a "fast track" Front End Engineering Design (FEED)
phase.
The summary report focusses on the Initial Target Case costing, but all
detailed costings for each scenario have been supplied.
The Life of Mine for all scenarios for the project was set at 10 years, with a
Discount Factor of 8%, with no escalation and no gearing applied to each of
the three operating scenarios.
The head grade was set at the current Mineral Resource Estimate average of
399ppm U3O8, with a cut-off grade 100ppm.
Financial analysis of the outputs of the Erudite Study
Assuming an initial 10-year mining and processing operation and using an
average US$90/lb. U3O8 price at an 8% discount rate, the financial outcomes
for the three operating scenarios comprise:
1. Low Case
§ C1 Cash operating cost US$ 42.2 /lb U3O8
§ Initial Capex US$ 41.1M, Sustaining Capex US$ 13.6M
§ NPV US$ 63.9M, IRR 30.1%
§ Payback 3.6 years
2. Competent Person Report Case
§ C1 Cash operating cost US$ 36.8 /lb U3O8
§ Initial Capex US$ 52.2M, Sustaining Capex US$ 17.3M
§ NPV US$ 106.6M, IRR 43.4%
§ Payback 2.9 years
3. Initial Target Case
§ C1 Cash operating cost US$ 33.6 /lb U3O8
§ Initial Capex US$ 64.6M, Sustaining Capex US$ 21.5M
§ NPV US$ 195.4M, IRR 72.0%
§ Payback 2.5 years
The following table details the various project inputs and financial outputs
for each of the operating scenarios for the development of the Henkries
Project:
Summary Table for Henkries Project Current Case Competent Person Report Case Initial Target Case
4.7 Mlb Resource 7 Mlb Resource 10 Mlb Resource
Key Physical Parameters Unit
Life of Mine years 10 10 10
Total Ore (dry) tonnes 5,341,000 7,954,000 11,362,000
Contained Uranium lbs U3O8 4,700,000 7,000,000 10,000,000
Total waste mined (dry) Mt 12,550,000 18,691,000 26,701,000
Plant Design Process throughput (dry) tpa 535,000 796,000 1,137,000
Annual waste mined (dry) tpa 1,255,000 1,870,000 2,672,000
Average Strip Ratio 2.35:1 2.35:1 2.35:1
Average Uranium Head Grade ppm U3O8 399 399 399
Cut Off Grade ppm U3O8 100 100 100
Forecast Uranium Recovery % 81% 81% 81%
Total Production lbs U3O8 3,807,000 5,670,000 8,100,000
Average Annual Production lbs U3O8pa 380,700 567,000 810,000
Capital Costs as detailed by Erudite
Project Capital including Owners Cost and Contingency US$ million 41.09 52.19 64.64
Sustaining Capital (including Tailings Storage Facility) US$ million 13.64 17.33 21.46
Operating Costs as detailed by Erudite
Mining US$/lb U3O8 produced 5.87 4.56 3.75
Processing US$/lb U3O8 produced 36.30 32.25 29.81
Combined C1 Cash Cost US$/lb U3O8 produced 42.17 36.81 33.56
Financial Inputs
Life of Mine Average Uranium Price US$/lb U3O8 90 90 90
ZAR:US$ exchange rate ZAR 18.58 18.58 18.58
Valuation Returns and Key Ratios - C1 Cash Cost Basis
NPV (Pre-Tax, real basis, ungeared) C1 US$M 63.9 106.6 195.4
IRR (Pre-Tax, real basis, ungeared) C1 % 30.1 43.4 72.0
Payback Period (Pre-Tax, real basis, ungeared) Years 3.6 2.9 2.5
Pre-tax NPV/Pre-Production Capex x 1.6 2.0 3.0
Cashflow Summary at the Mine Gate
Sales Revenue Gross US$M 342.6 510.3 729.0
Total Operating Costs C1 US$M 160.5 208.7 271.9
Project Operating Surplus US$M 182.1 301.6 457.1
Pre-Production Capex US$M (41.1) (52.2) (64.6)
LOM sustaining Capex (incl. closure costs) US$M (18.8) (23.8) (29.6)
Project Net Cashflow (Pre-Tax and Royalties) US$M 122.3 225.6 362.9
Neo Energy Metals, Chief Executive Officer, Sean Heathcote said,
"We are thrilled to confirm the robust economic potential of our Henkries
Uranium Project in all our operating scenarios. The project's financial
metrics of low capital intensity, combined with a significant IRR and quick
payback periods, in the strong uranium market, will put the project at the
forefront for early and fast-tracked development in the sector. In addition,
the forecast operating costs compare extremely well with our peers and
confirms the Henkries Project as one of the lowest cost producers of all new
uranium projects under development."
"The Company aims to fast track the Henkries project to the Target Case, in
the shortest time possible. To this end the work in the coming months will
focus on, increasing the resource base, testing and confirming the value
engineering options tabled by Erudite to improve the project economics further
and continuing to discuss both the offtake and financing options with the
various interested parties."
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation, and the Directors of the Company are responsible for
the release of this announcement.
ENDS
About NEO Energy Metals Plc
Neo Energy Metals plc is a Uranium developer and mining company listed on the
main market of the London Stock Exchange (LSE: NEO). The Company holds up to a
70% stake in the Henkries Uranium Project, an advanced, low-cost mine located
in South Africa's Northern Cape Province. It has been estimated by some that
the historical investment in the project was over US$30 million in exploration
and feasibility studies, Neo Energy Metals aims to increase the project's
mineral resources and complete an updated feasibility study ahead of a
determination of the development schedule at the end of 2024 to bring Henkries
into production.
The company is led by a proven board and management team with experience in
uranium and mineral project development in Southern Africa. Neo Energy Metals'
strategy focuses on an accelerated development and production approach to
generate cash flow from Henkries while planning for long-term exploration and
portfolio growth in the highly prospective Uranium district of Africa.
The Company's shares are also listed on the A2X Markets (A2X: NEO), an
independent South African stock exchange, to expand its investor base and
facilitate strategic acquisitions of uranium projects, particularly within
South Africa.
For Enquiries Contact:
Sean Heathcote Chief Executive Officer sean@neoenergymetals.com
Jason Brewer Executive Chairman jason@neoenergymetals.com
Faith Kinyanjui Investor Relations faith@neoenergymetals.com
Tel: +44 (0) 20 7236 1177
Tel: +44 (0) 77 1242 4838
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