Peninsula Energy’s uranium book expected to deliver US$8-9 million net cash margin in 2022

Peninsula Energy Ltd (ASX:PEN) (OTCMKTS:PENMF) (FRA:P1M) is predicting a net cash margin of between US$8-$9 million in 2022, as it stocks up on uranium concentrate to meet demand.

The company has entered into multiple binding purchase agreements to procure natural uranium concentrates – as U3O8 – sufficient to meet the entirety of its 2022 committed sales of 450,000 pounds.

U3O8, more formally known as triuranium octoxide, is a compound of uranium that has long-term stability and an extremely long half-life of over 4 billion years, meaning it emits radiation at a very slow rate, making it suitable for commercial and industrial use.

Strong demand

Peninsula CEO and managing director Wayne Heili said the purchase agreements underpinned funding for completion of MU1A field demonstration and other optimisation activities ahead of a production restart at its US-based Lance Project.

“Peninsula is the only ASX-listed junior uranium producer with sales contracts extending to 2030 and the sales volumes highlight the strength of our long-term contract book and existing relationships with our tier-one customers,” he said.

“Entry into these agreements to secure uranium concentrates sufficient for our nearer-term deliveries significantly de-risks our cash flow projections through to 2023.

“These contractual arrangements provide funding certainty, allowing us to continue advancing the key MU1A field demonstration and progress the Lance Project toward a return to commercial production.”

Heili said the forecast net cash margin was based on the difference between the fixed purchase price and the likely sales price based on customer agreements.

Lance Project

Commercial operations at the project were suspended in 2019 to allow the team on the ground to prepare for changes to the way it processes the uranium it mines.

It has sought authorisation to mine uranium via a low pH in-situ recovery (ISR) process in addition to the alkaline ISR process, in which groundwater fortified with oxygen and other materials like bicarb soda is pumped into a permeable ore body causing the uranium contained in the ore to dissolve.

Approximately 57% of uranium produced globally in 2019 was extracted via the low pH ISR process, which is cost-effective; and Lance is the only US-based uranium project authorised to use this industry-leading method.

As recently reported by Proactive, the company is busy gathering a wealth of data from the ongoing MU1A low-pH field demonstration.

Heili said the recent purchases would not impact timing with respect to a decision on a production restart at the Lance facility.

Peninsula builds stocks

Peninsula holds a portfolio of uranium concentrate sale agreements with major utilities for up to 5.45 million pounds U3O8 at average pricing of US$51 to $53 per pound with 4.1 million pounds of firmly committed sales and up to 1.35 million pounds of sales optional at the election of the customers.

Of the committed U3O8 sales, 1.1 million pounds can be satisfied with market sourced material in the next three years, with the balance to be supplied from the Peninsula’s production sources.

- Daniel Paproth

Story by ProactiveInvestors