Green light for big Greenland rare earths/uranium project
18th May 2012
SYDNEY, May 18 – The world-class $US1.53B Kvanefjeld rare earths and uranium project in Greenland, due for production start-up in 2016, has been given a pre-tax valuation of $US3.8B by Australia’s Shaw Stockbroking.
The full feasibility study and environmental and social impact assessments are due by the end of the year for the project, which has current resources of 861Mt containing 512.8Mlb of uranium, 9.22Mt of total rare earths oxides (TREO), 1.98Mt of zinc and a project mine life of +100 years.
Shaw analyst Vincent Pisani has given an ungeared project valuation at a pre-tax level of $3.808B and $3.080B after tax, using a discount rate of 10%. “We have discounted this valuation by 50% for the binary nature of a zero-tolerance uranium stance by the Greenland government on uranium mining and Greenland Minerals and Energy’s 61% interest in the project.
“On these assumptions, we have increased our price target for Greenland to $A2.25 per share from $1.80ps, a 350% premium to the current share price of $0.41.” Shaw recommends the company as a “buy.”
Pisani says the main conclusion from the prefeasibility is that the Kvanefjeld project would generate a pre-tax NPV10% of $4,631M, based on a long term uranium price of $US70lb and TREO price basket of $41.60kg. On a post-tax basis, the NPV10% is $2,947M.
The PFS evaluation covered a mine, mineral concentrator and intermediate refinery to treat 7.2Mtpa of ore to extract rare earth elements (REE), uranium and zinc. The processing plant is expected to produce 4 main products, including 2.6Mlb pa of U3O8, 26,200tpa of light rare earth carbonates, 10,400tpa of mixed rare earth carbonates and 4,200tpa of heavy rare earth hydroxide, along with a high grade zinc sulphide concentrate.
Pisani says unit costs of production of less than $31lb U3O8 and $8kg TREO puts Kvanefjeld in the bottom half of the cost curve for uranium producers and the lowest cost of the REE producers in the world. Key modelling used a uranium price assumption of $60lb for the project life and a basket of rare earths pricing at $41.65kg.
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