Deep Yellow shares jump on definitive study for Uranium project in Africa

Deep Yellow (ASX:DYL) shares were up 7% in lunchtime trade on Thursday as the company released the Definitive Feasibility Study (DFS) for its 100% owned Tumas Uranium Project in Namibia, Africa. 

The fundamental data underpins a scenario where Tumas receives a positive Final Investment Decision (FID), with attractive economics making that outcome more likely. 

Big takeaways 

The DFS outlines the following: 

• Gross revenue from uranium sales of $4.15bn - $5.4bn 

• Capable of producing up to 3.6 million pounds of uranium a year

• Metallurgical recovery rate of 93.8%

• Net Present Value of US$341m (A$477m)

• Internal Rate of Return (IRR) at 19.2% 

• Overall mine life of 22.25y 

• Additional ore reserves and other resources potentially extending to 30y

• Shallow open cut operation (cheaper than underground mining) 

• Initial capital costs of $436m, including: 

  • Mining - $13m

  • Process plant - $224m 

  • On-site Infrastructure - $20m 

  • Off-site infrastructure - $26m 

• Life of Mine all in sustaining costs of US$38.72/lb 

Key assumptions 

The assumptions underpinning the DFS are as follows: 

• Uranium price at US$65/lb 

• Vanadium price at US$7/lb 

Those projections assume the price of uranium will rise in the coming months and years. 

According to Trading Economics, the current uranium New York Mercantile Exchange price as at 1230 AEST Thursday 2 February 2023 is USD$50.80/lb.

What’s this about vanadium?

Vanadium will be produced at Tumas as a by-product of the larger uranium mining objective, should the mine go ahead with a positive FID. The metal is typically used as an alloy in steelmaking. 

“A more detailed analysis was not considered to be warranted at this stage,” Deep Yellow wrote of its Vanadium economics. 

“The vanadium price was used based on current prices for red cake…vanadium is a by-product of extraction and has little impact on outcomes.”

Novel approach

The company will sell vanadium that is co-leached from uranium ore as a product in its own right.

Leaching refers to the process of dissolving crushed rock in acids or acid-adjacent chemicals to remove target materials from host geology. 

Deep Yellow has described its approach as “novel,” but notes “chemistry is well described in [academic] literature.”

Worth noting is that vanadium purity is forecasted to be lower (40%) than that of uranium (over 90%). 

Carnotite in question 

Carnotite is the mineral being crushed in question. It contains both uranium and vanadium, and is what Deep Yellow will be mining before processing. 

Other radioactive mineral types are present, Deep Yellow writes in the footnotes of its DFS, but the company sees no change to the metallurgical recovery rate of over 93%. 

Uranium in question will be recovered as yellow cake. Yellow cake, the formal-informal name for powdered uranium oxide, is used as a feedstock in the production of nuclear fuel for power stations.  

It is turned into uranium hexafluoride, commonly known as enriched uranium.

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