WYOMING, USA – LANCE ISR URANIUM PROJECTS

(Peninsula Energy 100%)

INTRODUCTION

The Lance Projects are located on the North-East flank of the Powder River Basin in Wyoming. The original NuBeth Joint Venture between Nuclear Dynamics Inc, Bethlehem Steel Corporation and later Pacific Power and Hydro (NuBeth JV), discovered thirteen substantial zones of uranium mineralisation associated with an extensive system of roll fronts confirmed by drilling between 1970 and 1979. As part of this exploration program, the NuBeth JV drilled more than 5,000 exploration and development holes, totalling in excess of 912,000 meters. A proprietary database of the historic drilling and pilot plant data was acquired by Peninsula in 2007, defining a then relatively unknown uranium district of which Peninsula is now the dominant mineral rights holder.

The Company has explored only part of this area in the last five years and has successfully delineated over 53.7mlbs U3O8 JORC compliant resource.

The Lance Projects have 312 line kilometres of identified roll fronts and an exploration target of 104-163mlbs U3O8, which is in addition to the JORC-compliant resource. These roll fronts stretch over 50 kilometres north-south and are open to the north, south and west.

 Lance Project Location, Wyoming, USA

Figure 1: Lance Project Location, Wyoming, USA


As detailed below, allowable construction has commenced and subject to completion and full licensing Peninsula is targeting a low risk staged production ramp-up of 1.2mlbs p.a. U3O8 through the years 2014 - 2017; subsequently increasing to 2.3mlbs p.a.

Permitting Status & Pre-Construction  

There are 3 key licenses required in order to commence production at the Lance Projects

  1. Deep Disposal Well License
  2. Permit to Mine
  3. Source Materials License

Deep Disposal Well (DDW) Permit

In April 2011 Strata received approval from the WDEQ for the construction, testing, and operation of Underground Injection Control (UIC) Class 1 wells at the Lance Projects.

This deep disposal well (DDW) permit allows Strata to construct and test up to five such wells in the Ross Permit area. The DDWs will be used to inject low-level wastes into an isolated rock formation at a depth in excess of 8,000 feet below the surface. It is anticipated that these DDWs will meet the water management requirements of an ISR operation at Ross.

The issuance of the Class I UIC permit followed a review by the WDEQ and United States Environmental Protection Agency (USEPA) as well as a public notification and comment period, and is the culmination of 30 months of detailed environmental, geological and hydrological data gathering and analysis by Strata.

Permit to Mine

In November 2012 the Wyoming Department of Environmental Quality (WDEQ) granted Peninsula’s wholly owned subsidiary Strata Energy Inc. (Strata) a Permit to Mine (PTM) for the Ross permit area, the first planned production unit at the Lance Projects. The completion of this licensing action concluded a major milestone in advancing the Ross ISR project towards production.

The PTM is the second of three key licenses required for advancement of the Ross ISR project. The first license was the Deep Disposal Well (DDW) permit granted in April 2011, as detailed above. The final license required before commencement of production is the Combined Source and 11e.(2) Byproduct Material License (SML) issued by the US Nuclear Regulatory Commission (NRC). As detailed further below, Strata received the draft SML for the Ross ISR project in early November 2012.

Source Material License

In November 2012 Peninsula announced that the NRC has issued a draft SML to Strata. The NRC’s on-schedule issuance of the draft SML demonstrates that the project is technically sound and that the approaches to public and environmental safety outlined in the application were robust.

The issuance of the draft SML in less than two years after application submission reflected a significantly accelerated schedule over the applications of others in the industry, which have averaged 3 years or more in receiving draft licenses. Achieving this milestone on schedule and ahead of industry standard is indicative of the completeness of Strata’s application, experience of the Strata management team and the efficiency of the streamlined regulatory approval process.

To receive NRC approval, an application must complete three review processes: acceptance review (completed in June 2011); safety review, resulting in a Safety Evaluation Report (SER) (completed in March 2013 as detailed below); and concurrent environmental review, resulting in a Supplemental Environmental Impact Statement (SEIS) (completed in March 2014 as detailed below).

Peninsula expects the final SML to be granted on or about 31 March 2014.

Safety Evaluation Report

In March 2013 the NRC issued to Strata the SER for the Central Processing Plant and Ross Permit Area. The SER document acknowledges compliance of the Ross license application technical report with US regulations surrounding the receipt, possession and use of uranium byproduct and source materials.

The SER represents the conclusion of NRC technical review of the safety aspects of the application including:

  • Site characterization
  • Facility and process design
  • Effluent controls and waste management
  • Radiation safety plans and programs
  • Groundwater protection
  • Facility decommissioning and reclamation
  • Accident analysis

SEIS

In March 2014 the NRC issued the final SEIS for the Central Processing Plant and Ross Permit Area. With the SEIS now issued, Peninsula expects the SML to be granted on 31 March 2014. This would conclude the licesning process and Peninsula will be in position to complete full construction and commence production.

The SEIS is a comprehensive review of the project-specific environmental aspects and mitigation measures of the CPP and RPA as required under the National Environmental Policy Act. It analyses the environmental effects of the proposed action at the RPA, the environmental impacts of alternatives to the proposed action, and mitigation measures to either reduce or avoid adverse effects of the proposed action. Impacts assessed include land use; historical and cultural resources; visual and scenic resources; climatology, meteorology and air quality; geology, minerals and soils; water resources; ecological resources; socioeconomics; environmental justice; noise; traffic and transportation; public and occupational health and safety; and waste management. Issuance of the final SEIS formalises NRC’s determination that no major environmental impacts preclude the completion of licensing.

Pre-SML construction programme

Earthworks and Construction

Construction activity is continuing at the central processing plant (CPP) building and administration facility sites located in the Ross Permit Area (RPA). Following the completion of earthworks and building pad construction for the CPP and administration facilities in November 2013 excavation commenced for the installation of the Containment Barrier Wall (CBW), located along the south side of the building and pond locations. The CBW is now complete and ready for testing, and is a key part of site construction and on-site groundwater management. It will cause ground water to be directed via a drainage system into a vertical sump for subsequent pumping into an above ground diversion ditch.

Long Lead Items

Purchase orders were previously sent to vendors for the supply of long lead items including the Ion Exchange vessels and other pressure vessels. Off-site fabrication of these items is now well advanced.

Monitor Wells

Peninsula has completed a total of 271 mine planning drill holes during the period from 1 January to 26 November 2013 for a total of 137,165 feet at the Lance Projects.

The drilling included 31 ore zone (OZ) baseline water quality wells and monitoring wells, 234 delineation holes and 6 core holes all of which are located within and around Mine Units 1 and 2 (MU1and MU2) at the RPA.

The monitoring well program, which began in January 2013 is being conducted to provide correlations and baseline studies of the MU1 water quality and will further refine site-specific geological and hydrological parameters. These parameters are enhancing Peninsula’s overall understanding of the ore body and extraction rates. Delineation drilling is also being conducted to optimise the well field patterns and perimeter monitor well locations within MU1 and MU2. Core drilling is continuing in order to provide additional representative samples for ongoing leach testing and metallurgical studies that will assist in the selection of the most appropriate leach chemistry and ion exchange resin.

Several of the drillholes have intersected significant mineralisation, some of which is outside of the existing resource boundaries. The highlights of these include delineation holes RMR2716 which intersected 8ft @ 1030ppm U3O8 Grade Thickness (GT) .82, RMR2646 which intersected 6.5ft @ 520ppm U3O8 (GT .34), RMR2645 which intersected 4.5ft @ 740ppm U3O8 (GT .33), RMR2541 which intersected 4ft @ 550ppm U3O8 (GT .22), RMR2740 which intersected 9.5ft @ 270ppm (GT .25), and RMR2597 which intersected 4ft @ 520ppm (GT .21).


Map of Central Process Plant area Figure 2: Map of Central Processing Plant area and Mine Units 1 and 2 at Ross Permit Area

 

OPTIMISATION STUDIES

In September 2013 Peninsula announced the completion of the Wellfield Optimisation Study (WOS) which follows the Lance Central Processing Plant (CPP) Optimisation Study (OS) completed in March 2013. The WOS and OS were both undertaken as part of Peninsula’s detailed engineering in preparation for the Lance Projects construction.

The OS delivered significant capital cost savings in the CPP while the WOS has delivered a significant reduction in wellfield capital and operating costs along with an increased rate of wellfield production. The combined effect of this optimisation process adds substantial economic value to the project.

The operating parameters modelled in the WOS are the same as those applied to the OS and May 2012 Feasibility Study (FS), namely the Ross, Kendrick and Barber Production Units feeding a CPP with a permitted capacity of up to 3.0mlbs per annum. The first production unit will be at Ross with a capacity of up to 1.25mlbs per annum followed by the inclusion of the Kendrick Production Unit, ramping up over several years to a total of 2.3mlbs per annum steady-state production.

The WOS focused on the detailed wellfield design for the first mining unit within the Ross Production Area. The parameters derived from the review were then applied over the total resource base. This resulted in a reduction in the total number of wells to be developed decreasing both the wellfield capital and wellfield closure costs.

Whilst undertaking the value engineering on the CPP the Company completed further metallurgical test work to optimise the lixiviant solution that is to be cycled through the injection wells. These test results have demonstrated that the pregnant lixiviant can be extracted with a higher head grade than previously forecast. The revised head grade is consistent with other mature ISR operations in the Powder River Basin and provides the following benefits to the project:

  • Enables a faster rate of mineral extraction from the ore body, decreasing the overall life of mine by 4 years whilst maintaining life of mine production at over 28mlbs (based on the existing JORC compliant resources only);
  • Enables the project to achieve a steady-state production rate of 2.3mlbs per annum from two production units concurrently, as opposed to three previously; and
  • Allows the inclusion of the Barber Production Unit to be deferred until 2020 when the Ross Production Unit commences its stage of natural decline, deferring significant capital expenditure at the Barber Production Unit.

Using this updated information, Peninsula has re-run its economic analysis for the Lance Projects.

The WOS and OS were conducted by senior development and production staff at Strata, in conjunction with the engineering and construction contractor TREC Inc. (TREC).This production team includes geologists and engineers with extensive ISR process-well field design, plant construction and production experience.

The WOS forms the basis for securing the required financing for the Lance Projects.

URANIUM SALES AGREEMENTS

In February 2011 Peninsula signed a long term sale agreement to supply 1,150,000 lbs of uranium oxide (U3 O8 ) from the Lance Projects. Peninsula is currently engaged in negotiations with several key utility and end user groups in the nuclear power industry with the aim of securing further long term sale agreements.

The existing sales agreement was secured at an escalated fixed price, quantity and term. The weighted average contract pricing over the term of the contract is approximately US74/lb which compares very favourably with existing uranium contract prices. The terms of the sale agreement will see Peninsula supply U3 O8 over a period of 7 years.

JORC COMPLIANT RESOURCE

On 24 January 2013 Peninsula announced a further upgrade to the JORC-compliant Resource Estimate for the Lance Projects. This upgrade was achieved by the completion of an additional 676 rotary mud drill holes completed in the seven months subsequent to the March 2012 resource estimate.

The resource has been calculated by applying a combined constraint of a GT of 0.2 contour and 200ppm eU3O8. These cut offs are considered to be appropriate for both calculating and reporting of in-situ recovery (ISR) resources at the Lance Project.

The measured, indicated and inferred resources are located in host sandstones that have demonstrated positive uranium recovery from test-work. Geological modelling of the extensive down-hole geophysical data has accurately defined the impermeable shale and mudstone horizons that form the confining horizons to the mineralised sandstones.

 

Table 1: Lance Project, Wyoming USA - Classified Resource Summary (U3O8) December 2012

TotalTonnes Ore
(M)
U3 O8 kg
(M)
U3 O8 lbs
(M)
Grade
(ppm U3 O8)
Measured4.12.14.5495
Indicated11.65.712.7497
Inferred35.516.636.5467
Total51.224.453.7476
(The JORC resource is reported above a lower grade cut-off of 200ppm and a GT of 0.2).


Within the Ross Production Unit there is a combined measured, indicated and inferred resource of 11.2Mlbs U3O8 with an average grade of 518ppm and an average GT of 0.47.

At Kendrick the combined measured and indicated resource totals 4.82Mlbs U3O8 at an average grade of 497ppm and an average GT of 0.47.

At Barber the combined measured and indicated resource totals 2.41Mlbs U3O8 at an average grade of 421ppm and an average GT of 0.42.

 

Table 2:  Lance Project Classified Resource by Resource Unit (U3 O8) December 2012

RossTonnesGrade
(ppm U3 O8 )
U3 O8 lbsAverage Thickness
(ft)
Average GT
Measured2,824,5715003,112,02910.00.50
Indicated5,823,1435316,818,8228.40.45
Inferred1,145,3774971,253,76210.50.52
Total9,793,09151811,184,6129.00.47
      
KendrickTonnesGrade
(ppm U3 O8 )
U3 O8 lbsAverage Thickness (ft)Average GT
Measured682,078506761,0869.30.47
Indicated
3,706,8084964,056,8669.40.47
Inferred23,834,08247224,799,06810.00.47
Total28,222,96847629,617,0209.90.47
      
BarberTonnesGrade
(ppm U3 O8 )
U3 O8 lbsAverage Thickness (ft)Average GT
Measured636,302461647,0459.50.44
Indicated
2,002,1844001,765,2639.80.39
Inferred10,498,57445210,460,2849.70.44
Total13,137,06044412,872,5929.50.42
      
TotalTonnesGrade
(ppm U3 O8 )
U3 O8 lbsAverage Thickness (ft)Average GT
Measured4,142,9514954,520,1599.80.49
Indicated11,532,13549712,640,9519.00.45
Inferred35,478,03346736,513,1149.790.46
Total51,153,11947653,674,2249.70.46

Figure 3: Resource Area Location Map

Resource Area Location Map


EXPLORATION TARGET

The Lance Project covers an area of over 120km² within which there is a combined total of 312 line kilometres (190 miles) of known stacked roll fronts. Of this total, only a small percentage has been explored, with over 90% of the drilling concentrated within the more advanced Ross, Kendrick and Barber areas. Based on the historic conversion rate from roll front length to a drill-defined resource, the exploration target of the Lance Project, which is in addition to the JORC-compliant resource, is assessed at between 104 and 163 Mlbs U3O8. The exploration target is based on an anticipated grade range of 426ppm to 530ppm U3O8. This grade range approximates the minimum and maximum modelled grades respectively.

 

Table 3: Lance Project Exploration Target

Exploration AreasTonnes
(M)
Grade
(ppm U3 O8)
eU3 O8
(Mlbs)
RangeFromToFromToFromTo
Total168.9185.9426530157.7217
(Totals include existing JORC Resource)