Evolution of a Monster – A look at the Triple R – the world’s largest, undeveloped high-grade uranium deposit

A009_C014_0715FNOn January 9, 2015, after two years of drilling, Fission Uranium released a maiden resource estimate for its high-grade uranium discovery at PLS, in Saskatchewan’s Athabasca Basin region. The discovery, which had netted the PDAC Bill Dennis award for its President and Chief Geo, Ross McElroy, and The Northern Miner’s Mining Persons of the Year for McElroy and CEO, Dev Randhawa, was now officially host to the Triple R Deposit – the largest undeveloped high-grade deposit in the Athabasca Basin.  A lot has happened since January.

6b - 20140803_PLS_CoreDrill_R780E_2On September 3, 2015, following nearly two more seasons of aggressive drilling, Fission followed its remarkable resource estimate with a Preliminary Economic Assessment (PEA) that shows the Triple R has the potential to become one of the lowest cost sources of uranium production in the world.
The PEA is an important milestone for the Triple R because it starts putting dollar figures next to an asset that has previously only been measured in depth, weight, and grade.  Here are some of the key highlights from the PEA report, which was carried out by the highly-respected RPA Inc. of Toronto, Ontario:

  • Average OPEX of US$14.02/lb U3O8
  • Base case pre-tax NPV of $1.81 billion
  • Base case pre-tax IRR of 46.7 per cent
  • Rapid pay back in 1.4 years
  • Project includes mill and avg annual production of 7.2 million lbs U3O8
  • Hybrid open pit and underground mine
  • Mine life of 14 years
  • Metallurgical recovery of 95 per cent
  • Base case pre-tax Net Cash Flow over proposed LOM of $4.12 billion
  • Estimated CAPEX of $1.1 billion

The base case referred to in the bullets above uses a price of US$65/lb U3O8 and an exchange rate of US$0.85:C$1.00). It’s also worth noting that the PEA focuses solely on the development and extraction of the R00E and R780E zones (which form the current Triple R deposit) and does not include the high-grade R600W zone that lies just over half a kilometre west of the Triple R.

The R600W zone, which was originally thought to be a low-grade zone during the early stages of the PLS discovery, is now host to wide, high-grade mineralization. With the lithology showing strong similarities to the Triple R’s R780E zone, Fission has focused heavily on R600W during the current and prior drill programs. However, while the zone has now grown substantially, the data was not available for the PEA as the bulk of the drilling had yet to take place when the report was being conducted.

At this time, the western side of the Athabasca Basin does not have a mill. While one did previously exist at Cluff Lake, located some 80 kilometres north of the Triple R, it ceased production in 2002 and has since been deconstructed. The PEA thus approaches the Triple R as a stand-alone mine and mill operation. This obviously means a considerable CAPEX (est. $1.1B). However, the size, grade, and shallow nature of the project offsets this with a rapid pre-tax pay back in 1.4 years. Also, the potential for the mill to become a centrepiece for a western Athabasca Basin uranium district is very strong and could service operations such as Areva’s Shea Creek, as well as new discoveries in the region.

6b - Core shacksIn terms of the specific approach to developing and extracting the deposit, the PEA suggests a combination of open-pit and underground mining, with a dyke system (dyke and slurry wall) for water control. This would allow high-grade mineralization (above four per cent U3O8) to be captured within the open pit, avoiding the need for complex and costly underground mining methods characteristic of all deposits and mines in the Basin’s containing high-grade zones. This hybrid approach utilizes methods common to the Athabasca Basin region.

Beyond the figures themselves, Fission’s PEA is interesting because the only other published PEA in the Athabasca Basin was for Hathor’s (now Rio Tinto’s) Roughrider deposit on the eastern side of the basin. That doesn’t leave much room for comparison, particularly as the Roughrider is smaller and deeper than the Triple R but does have access to operating, high-grade mills. Perhaps more relevant is that the OPEX means the Triple R has the potential to be one of the lowest-cost uranium producers in the world.

There’s no question that the Triple R is a remarkable asset with an exciting future. Exactly who will be taking it forward from here is currently waiting on two shareholder votes. On July 6, 2015, Fission Uranium and Denison Mines announced their intention to merge. Technically, Denison has agreed to take over Fission, however, Fission’s management team will be running the merged company and no doubt McElroy will be looking to bring his highly successful technical team with him.

In October, the shareholders of both companies will vote on the merger. If it’s a yes, the companies will officially merge within a few days. If it’s a no, they will go their separate ways. Whatever the outcome, we’ll be keeping a close eye on the progress of the Triple R.

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