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Friday
Oct262012

Forsys Metals sees uranium price soaring on demand spike

TORONTO (miningweekly.com) – Namibia-focused uranium project developer Forsys Metals believes that the price of uranium would top $83/lb by 2014 as nuclear power producers vie to secure long-term supplies.

Forsys CEO Marcel Hilmer on Friday told Mining Weekly Online he expected the price of uranium oxide (U3O8) to spike in the near term, as the current global supply of U3O8 was already significantly below the demand of about 170-million pounds a year.

The company is developing the Valencia and Namibplaas uranium projects, in Namibia, and Hilmer pointed out that the timing of advancing the projects was of critical importance, placing the company in a position to capitalise on the expected upturn in demand for the radioactive yellow product.

“I do not know of any other commodity, which could at the least, expect a 60% increase in demand,” Hilmer said in Toronto.

He was referring to the 433 nuclear reactors that were currently active around the world, and needed a constant stream of uranium to feed the nuclear chain reactions that generate the heat in nuclear power reactors.

Further, around the globe there are about 548 new nuclear reactors being planned and of that amount, about 323 were under proposal, 160 were in the planning phase and 65 were under construction.

That would result in a 30% growth in the number of reactors by 2020, with Chinese nuclear power generation alone expected to double to 80-million kilowatts by the end of the decade.

Hilmer said the decision by Germany to phase out nuclear power was of little consequence to the uranium industry, owing to a number of emerging nuclear users driving the demand. This included China, Russia, India, South Korea and the United Arab Emirates, who were all boosting their reliance on nuclear power generation.

Nuclear power, as a source of cheap, reliable power, its environment-safe credentials and stable base-load capability was increasingly being applied to provide in the needs of power-hungry world economies. It is seen as a necessary contributor to the security-of-energy supply chain.

He added that there was no significant new uranium supplies coming on stream in the medium-term, and secondary sources of uranium, such as the Russian-US agreement concerning the disposition of highly enriched uranium extracted from nuclear weapons, was coming to an end after 2013, which augured well for the company’s twin projects.

In recent times, there had been a trend that uranium was increasingly being supplied by a small number of significant suppliers and countries. However, this could potentially change in the near term.

Forsys expected Africa and Kazakhstan to lead uranium production expansion in the future, and much more exploration was indeed already taking place as higher prices and higher demand forecasts drew the attention of several miners.

NAMIBIAN URANIUM

Forsys Metals at the end of September reported an updated National Instrument 43-101-compliant resource for its Namibplaas project, paving the way for work to start on a technical report aimed at consolidating it with the company’s other nearby Valencia project.

This could result in Forsys potentially developing the world’s next significant uranium mine.

The latest Namibplaas resource estimated 33.4-million pounds of U3O8 grading 152 parts per million (ppm), using a cut-off grade of 100 ppm, to be present on the property.

This resulted in a combined measured and indicated resource at a cut-off grade of 100 ppm of 93.9-million pounds of U3O8, grading 175 ppm being present on the properties, which were located only seven kilometres apart.

Forsys said the resource estimate for Namibplaas enabled it to now concentrate on two significant high-grade zones that would be the focus of optimising the openpit design.

Hilmer said the company would be able to build upon and optimise the existing process plant from the compliant Snowden technical report, which was prepared for the Valencia project in 2010.

“We remain confident that the outcome will be a consolidated project with better economics, reduced timeframes to achieve a feasibility study and consequently, a shortened timeframe to commence construction and ultimately reach production,” he said in a statement.

The new consolidated technical report would look at the suitability of combining the two operations as a single feed to an optimised process plant to be located at Valencia. The results of the study were expected by the second quarter 2013.

Forsys added it would continue with additional drilling on both properties to test the extension of the Valencia and Namibplaas resource.

Forsys initially focused on its Valencia U3O8 project and had acquired a 25-year mining licence, making it one of only two fully permitted development-stage projects in the country.

The Valencia project had an after-tax net present value of about $273-million, with reserves of about 60.5-million pounds of U3O8.

The company added that it had the necessary funds to see it through to completion of the combined technical report in 2013.

Forsys shares listed on the Toronto-bourse climbed by 8.33% on Friday to trade at 65 Canadian cents apiece.

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