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Lance Project, Wyoming USA
Location: Crook County, NE Wyoming; 32 Miles NE of Gillette
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, totaling in excess of 912,000 metres. A proprietary database of the historic drilling and pilot plant data was acquired by Peninsula in 2007, defining a relatively unknown uranium district of which Peninsula is now the dominant mineral rights holder.
The Lance Projects have 312 line kilometres of identified roll fronts, 13 zones of drill-determined mineralisation and an exploration target of 158-217mlbs U3 O8 . These roll fronts and mineral zones stretch over 50 kilometres north-south and are open to the north, south and west. The Company has explored a small part of this area in the last four years and has successfully delinated a 53.7mlbs of U3 O8 JORC compliant resource.
Figure 1: Lance Projects Location
Permitting Status & Pre-Construction
Permit to Mine
On 22 November 2012 Peninsula announced that the Wyoming Department of Environmental Quality (WDEQ) has granted a Permit to Mine (PTM) to wholly-owned subsidiary Strata Energy Inc (Strata) for the Ross ISR project, the first planned production unit at the Lance Projects. The completion of this licensing action concludes a major milestone in advancing the Ross ISR project towards production.
The PTM is the second of three licences required for advancement of the Ross ISR project. The first license was the Deep Disposal Well (DDW) license granted in April 2011. 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.
Having concluded the PTM licensing process, Strata is now focusing its entire permitting efforts on completing the SML application process. Additionally, Strata is set to commence construction and the ordering of long lead-well items prior to the issuance of the SML. Construction will include installation and testing of a deep disposal well, installation of monitoring wells, the ordering of certain components of the CPP, civil works in preparation for the CPP and CPP footings. These pre-licensing construction activities are permissable, subsequent to changes to the NRC guidelines, and will shorten the overall project development timeline.
The Company has submitted technical and environmental applications to the Wyoming Department of Environmental Quality (WDEQ) for the Permit to Mine and the Nuclear Regulatory Commission (NRC) for the Source Materials License. These submissions have been accepted as technical/environmental complete for review by both agencies. The quality of the submissions has provided the Company with the basis to submit amendments to bring on the further production units in a timely and efficient manner.
Following a recent review of the permitting strategy the Company is confident in finalising permitting. In addition all new project areas are being designed so they are contiguous with the Ross permit area and as such will be deemed to be amendments to the Ross Permit (once issued) rather than standalone applications. This strategy will significantly reduce the permitting process and timing going forward.
Peninsula plans to commence production in 2014 which will include the installation and testing of a deep disposal well, installation of production monitoring wells, the ordering of certain components for the CPP and the commencement of civil works in preparation for the CPP.
Combined Source and Byproduct Material License
On 31 December 2010 Peninsula, through Strata, submitted its application to the NRC for a Combined Source and 11e.(2) Byproduct Material License.
The application requested authorization to construct and operate an ISR facility at Peninsula's Ross ISR Project, located near Oshoto, in north-eastern Wyoming and was the first of two major regulatory submissions completed by Peninsula during December 2010 and January 2011.
The submission of the license application followed approximately 25 months of drilling, baseline testing, data analysis, resource modeling, process design, and public outreach and was prepared in accordance with relevant NRC regulations and guidance.
On 29 June 2011 Peninsula received formal acceptance by the NRC of its application for a Combined Source and 11e.(2) Byproduct Material License. The acceptance review was performed to confirm the completeness and technical adequacy of the application, which is now undergoing a formal, detailed technical and environmental review. Peninsula has received and responded to further requests for information.
The NRC has also advised that it will complete the draft supplemental environmental impact statement (DSEIS) by no later than December 2012.
Deep Disposal Well (DDW) License
On 13 April 2011 Peninsula, through its wholly owned subsidiary Strata Energy Inc (Strata), received approval from the WDEQ for the construction and testing of Underground Injection Control (UIC) Class 1 wells at the Lance Projects.
The UIC permit is the first of three main licenses the Company requires to be granted for it to commence mining operations at Lance, and a license that has caused delays for other developers in the region. This deep disposal well (DDW) license allows Strata to construct and test 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 will meet the water management requirement of an ISR operation at Ross.
The issuance of the 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.
On 16 January 2012, the United States Nuclear Regulatory Commission (NRC ) advised Strata tha the development of a deep disposal well to test subsurface conditions would be considered exploration activity (as opposed to construction) and therefore Strata can begin drillng without any further approval.
As indicated above, this decision allows the Company to proceed with DDW testing significantly ahead of original schedule and could see flow rates at the upper limits of expectation that would lead to significant capital expenditure reductions at the Project.
In December 2011 Peninsula completed the Ross Project Definitive Feasibility Study (DFS ) and the Lance Projects Expanded Economic Study (EES ) on three production units planned at Ross, Kendrick and Barber. In May 2012 Trec Inc (Wyoming based ISR engineers) completed an optimised Feasibility Study (FS ) on the three planned production units, the key results of which are summarised below:
- NPV US$251 million (8% discount rate)
- Initial capital costs of US$78 million inclusive of Central Processing Plant
- Steady state total production and ongoing wellfield development costs of US$36.60 (C1 cash costs of US$12.94 per pound)
- Planned steady state production rate of 2mlbs U3 O8 per annum
- Initial mine plan based on 29mlbs recovered U3 O8
The FS was completed on the JORC compliant resources of 51.1mlbs U3 O8 at the Ross, Kendrick and Barber production units only. This number assumes the conversion of a 23.88mlbs of the 36.78mlbs of inferred U3 O8 resources to indicated category or better.
The FS anticipates the expanded project including Ross, Kendrick and Barber production units feeding a Central Processing Plant (CPP ) with an expandable capacity of up to 3.0mlbs per annum, but excludes the production of Vanadium at this stage.
In the FS the first production unit will be at Ross with a capacity of 750klbs per annum and production ramping up over 3 years to 2mlbs per annum steady-state production with the inclusion of the Kendrick and Barber production units.
The FS was completed to further demonstrate the potential of the broader Lance Projects. Realisation of this potential will be dependent on continued exploration and permitting success. In the FS further production units are assumed to be permitted for development at Kendrick and Barber and to follow Ross into production at 12-month intervals feeding the CPP. The economic evaluation of these production units, conducted as part of the FS yield an estimated NPV of US$251 million (at an 8% discount rate). This excludes Vanadium credits.
The FS optimised the engineering and operational aspects of the DFS whilst maintaining the key parameters applied to the Ross production unit (as updated by the March 2012 JORC compliant resource statement). The FS has utilised a discount rate at eight percent (8%) and has included contingencies relative to the respective production units.
The FS has for the Kenrick and Barber production units used a recovery of 76%. This was derived from metallurgical test work, which yielded averaged recoveries greater than 80%. It should be noted that prior to determination of mineral recoveries for in-situ mining operations is complicated by the need to approximate in-ground conditions during the laboratory testing process.
The FS included four deep disposal wells at each production unit. It should be noted that the FS contains estimates of Inferred resources being converrted to Indicated resources which are based on the existing JORC compliant resources within the Lance Projects and have had the operational, production and financial parameters generated by the FS applied to them. The Company and its advisors consider this to be appropriate due to the homogeneity of the mineralisation and operating environment.
The Company is also continuing the drilling program at Kendrick and Barber with the aim of upgrading a minimum 65% of the Inferred resources into a measured or indicated category to provide the feedstock for the expanded project. The Company last reported a resource upgrade at the Lance Projects in March 2012 and with continued drilling success will complete a recalcuation of the resource estimates before the end of 2012.
Figure 2: Lance Uranium Projects, Wyoming, USA.
Uranium Sales Agreement
On 15 February 2011 Peninsula signed a long term sale agreement to supply 1,150,000 lbs of uranium oxide (U3 O8 ) from the Lance Projects. During 2010 Peninsula had engaged key utility and end user groups with the aim of securing long term sale agreements, and after a detailed negotiation process Peninsula agreed to terms that secure the sale of U3 O8 from Lance at escalated fixed price, quantity and term. The weighted average contract pricing over the term of the contract is consistent with the average term price used in the PFS. The terms of the sale agreement will see Peninsula supply U3 O8 over a period of 7 years. Negotiations are continuing with other groups involved in the nuclear power industry.
Current Lance Projects JORC Compliant Resources
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 additonal 676 rotary mud drill holes completed in the seven months subsequent to the March 2012 resource estimate.
The key objective of the 2011-12 drilling program was to increase the measured and indicated resources in preparation for commencement of milling operations at the Lance Projects. The revised JORC compliant resource estimate of 53.7mlbs U3O8 includes a further 2.5mlbs increase in Measured and Indicated Resource since the March estimate.
The 12 month period spanning October 2011 - October 2012 has now seen in excess of 5mlbs inferred U3O8 resource converted to the measured and indicated categories. This is more than twice the planned annual steady state production levels for the Lance Projects.
The remainder of 2012 year saw the driling focused on completing regional baseline monitoring wells that are part of the process to include the Kendrick Production Unit in the Permit Amendment process as detailed below.
Table1: Lance Project Classified Resource Summary - December 2012
The resource has been calculated by applying a combined restraint of a grade thickness product (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.
Lance Projects - Exploration Potential
The Lance projects covers an area of over 120km2 within which there is a combined total of at least 305 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 and Barber areas. Based on the historic conversion rate from roll front length to a drill-defined resource the mineralised potential of the Lance Projects, which is in addition to the JORC-compliant resource, is assessed at between 104 and 163mlbs eU3 O8 .
Table 3: Lance Projects Exploration Potential
e U3 O8
In early 2011 Peninsula completed a representative diamond drilling and core sampling program over the Ross Permit Area resource in order to obtain sufficient data to define a vanadium resource of 1.74Mlbs V2 O5 . Based on 90 chemical assays an average U3 O8 / V2 O5 ratio of 3:1 was used to define the V2 O5 resource.
Following further studies specific ratios were applied to different parts of the uranium resource as determined by their respective stratigraphic position and horizontal position within the redox system. The updated vanadium resource for the Ross and Kendrick Permit Areas as at March 2012 are summarised in Table 4 below.
Table 4: Vanadium Resource - March 2012
Drilling Program and Resource Confidence
On-going drilling is enhancing the grade and definition of the existing drill-defined resources at the Ross, Kendrick and Barber production areas and continuing to convert areas of mineralised potential into JORC-compliant resources. The positive results to date provide further confidence that mining will commence within the targeted time-frame with production continuing over an extended mine-life.
Figure 3: Lance Projects Drilling Program, Wyoming, USA
Recent drilling has been focused on converting inferred resources to the indicated category in the planned Kendrick production unit located to the west of the Ross production unit.
Previously driling in the area has prev iously identified the K3, K4, K5, K5A and K6 roll fronts. These roll fronts merge in places to produce wide areas of continuous mineralisation. This continuous mineralisation has now been identified over a combined strike length of 22 kilometres with horizontal widths of up to 60m in the northern K5 area. The demonstrated continuity of the K3 roll front is over 7 kilometres, the K4 roll front over 1 kilometre, the K5 roll front over 4.3 kilometres and the K6 roll front over 9.2 kilometres.
In addition to the resource expansion drilling, Peninsula has also completed a series of diamond core holes within the existing permit area, with the results to be used for futher metallurgical studies. These holes have returned thick intervals of uranium mineralisation which is indicative of the area within the Ross Production Unit.
The drilling along the Kendrick roll front system is producing consistent thick high-grade intercepts, which has resulted in its prioritisation due to its resource expansion potential and its proximity to the proposed site of the Lance CPP. The drill density and demonstrated continuity of mineralisation is expected to result in significant levels of inferred resources being upgraded to indicated category.
In addition to the driling above, Peninsula re-logged three historic holes during the quarter for a total of 1,600ft. All three holes returned GT's in excess of 0.2 including SPD347MRE which intersected 7.0ft @ 810ppm (GT 0.57).
Current interpretations suggests that there is a total of 305 line kilometres of mineralised roll fronts in the greater Lance Projects and that the delineated mineralisation to date in the Kendrick roll fronts represent only 7% of the estimated mineralised roll front systems within this.
The latest interpretation of the existing database by Peninsula's geological team has identified and priority ranked over 500 follow-up drill targets within the Lance Projects. It is estimated that these drill targets will form the basis for on-going exploration over the next 5-10 years.
Figure 4: Kendrick Area Location Map Showing Locatin of Significant Results